On Sunday 11 October a blogger on the Russian investor forum Smart-Lab posted a piece titled "Помоги Родине! Купи ОФЗ!!!" ("Help the Motherland! Buy OFZ!!!"). It was not a Finance Ministry campaign. It was a parody of one: "Enemies all around, and the federal budget is ever more in deficit," the author wrote, before urging readers to buy federal loan bonds, "preferably on Wednesday, at the Finance Ministry auction", at yields of 16.5–17.5% in rubles. The most upvoted reply asked the state to scrap income tax on OFZ coupons first.
The post landed on a real problem. The Russian Finance Ministry has to sell far more debt than it planned, with long-term yields near 17%, to a market that has already walked away from two auctions since July. The team looked at what the numbers say about who is lending to the Russian state, at what price, and why.
The deficit that outgrew the budget law
The 2026 budget law, passed last year, set the federal deficit at 3.786 trillion rubles, or 1.6% of GDP. By the end of August the actual gap was 5.795 trillion. In September the ministry raised its full-year estimate to 7.345 trillion rubles, 3.2% of GDP, almost double the law.
The preliminary figure for January–September, published on 9 October, is a deficit of 5.186 trillion rubles, or 2.2% of GDP, against 3.471 trillion a year earlier. September alone showed a surplus of about 609 billion rubles. Oil and gas revenue fell 17.2% to 5.471 trillion while spending rose 14.5% to 34.825 trillion.
The draft budget for 2027–2029, submitted to the Duma on 30 September, does not close the gap. It plans a 2027 deficit of 5.443 trillion rubles (2.2% of GDP), against 3.186 trillion in the current law, with deficits of 5.12 trillion and 5.245 trillion in 2028 and 2029. Spending on defence and security in 2027 is put at 17.1 trillion rubles, roughly a third of the federal budget, according to Reuters figures cited by The Moscow Times.
Who is actually lending
The 2026 borrowing programme set gross OFZ sales at 5.510 trillion rubles and net borrowing at 4.173 trillion. The budget documents have since raised the net figure to 5.016 trillion. By the end of September the ministry had raised about 4.13 trillion.
The ministry cancelled its auctions on 24 June and 8 July and then suspended them from 20 July to 2 September. A floating-rate issue offered on 15 July drew no acceptable bids. When sales resumed on 2 September, the ministry placed an entire 1 trillion ruble floater, series 29031, in a single day, raising 938.9 billion rubles. Banks borrowed almost the same amount from the Bank of Russia that day, The Moscow Times reported, citing economist Vladislav Inozemtsev, who called it a coordinated operation. Third-quarter sales finished at 1.264 trillion rubles against a plan of 1.5 trillion, 15.7% short. The last auction of the quarter, on 30 September, offered OFZ 26228 maturing in 2030 and was declared void for lack of bids at acceptable prices.
The fourth-quarter plan is 2.45 trillion rubles over 11 auction days, the largest quarterly target of the year, with 1.25 trillion meant to come from bonds longer than 10 years. The first auction, on 7 October, sold 35.7 billion rubles of OFZ 26252, maturing in October 2033, at a yield of 16.63% and an average price of 85.56% of par, against demand of 134.4 billion.
The buyer base explains the strain. Under sanctions the Russian state has no foreign market: US Treasury Directive 1A, issued on 22 February 2022, bars US financial institutions from primary and secondary dealings in Finance Ministry bonds issued after 1 March 2022, and investors from "unfriendly" countries have had Russian securities held in frozen type C accounts since March 2022. The lenders are domestic. According to Bank of Russia data summarised on Smart-Lab, systemically important banks bought 73.6% of primary placements in September, mostly floaters. On the secondary market, households were net buyers of 28.4 billion rubles in September, up from 15.7 billion in August, while the large banks sold 160 billion.
That is the arithmetic behind the parody. A retail inflow of 28 billion rubles a month does not move a quarterly plan of 2.45 trillion.
Yields above the key rate
The Bank of Russia held its key rate at 14% on 11 September, after ten consecutive cuts from the 21% peak set in October 2024. The next decision is due on 23 October. The 10-year OFZ yield closed at 16.85% on Friday 9 October, according to Trading Economics, up 1.76 percentage points over the year. Long bonds therefore yield almost 3 percentage points more than the key rate, a spread that signals investors expect either higher inflation or a lot more supply, or both.
Inflation is not helping. Rosstat put annual inflation at 6.35% in September, with prices up 0.35% in the month against a consensus of 0.27%. Weekly data for 29 September to 5 October showed a 0.96% jump after utility and rail tariffs were raised, taking the annual estimate to 7.08%. In its September statement the central bank said underlying price growth had accelerated to 5–6% annualised and that "current price pressure has intensified significantly" in recent months.
What happened to the retail bonds last time
Russia has tried a dedicated retail bond before. OFZ-n, the "people's" federal bonds, were launched on 26 April 2017 with a 30 billion ruble debut issue sold through Sberbank and VTB, followed by issues of 15 billion each. In March 2022 the ministry suspended them, citing worse borrowing conditions. In November 2023 Denis Mamonov, head of the ministry's public debt department, said there were no plans to bring them back: "For us it was never a significant source of borrowing. On the scale of the overall borrowing programmes it was less than 1%."
The lesson holds now. Households can absorb tens of billions of rubles; the state needs trillions. When it needs them quickly, as on 2 September, it sells floaters to banks that refinance at the central bank.
Risks for holders
For a ruble investor inside Russia the risks are concrete.
- Inflation: a 16.6% yield on a 2033 bond is only attractive if inflation returns to the 4% the draft budget assumes for 2027–2029. Weekly prints above 7% annual point the other way.
- Duration: the long-bond index RGBI traded around 111 points in early October, near its summer lows. A holder of OFZ 26252 bought at 85.56% of par carries years of price risk if yields rise further.
- The ruble: the Finance Ministry plans to buy 279.4 billion rubles of foreign currency between 7 October and 6 November under the fiscal rule, which economist Yegor Susin estimates could weaken the ruble by 2–3 rubles per dollar on a monthly average.
- Liquidity: floaters pay RUONIA-linked coupons that protect against rate rises, but they also raise the state's own interest bill. Debt service is forecast at 4.6 trillion rubles in 2027, 9.4% of federal spending.
What it signals
The team draws three conclusions. First, the war budget has moved from the National Wealth Fund to the bond market: the 2027–2029 plan no longer uses the fund to cover deficits, and gross OFZ sales of 7.722 trillion rubles are planned for 2027, net 6.4 trillion. Second, the market is pricing that supply, with long yields near 17% while the key rate sits at 14%. Third, when auctions fail, the fallback is bank floaters financed by central-bank liquidity, which is a quiet form of money creation that feeds back into inflation.
In analyst Ruslan Averin's view, the Smart-Lab parody is a better summary of Russian state finance than any official statement this month: patriotism is being asked to fill a gap that banks, the central bank and higher taxes are actually filling. The numbers to watch are the next three Wednesday auctions, the 23 October rate decision and the October inflation data.
Related: Ukraine's record retail OVDP demand, the NBU decision of 17 September and what it means for OVDP and refinery strikes and record diesel prices.