Government short-term bonds (liabilities) are widely used by many countries to finance the short-term needs of the state and occupy an important place in the money market. These bonds are widely used both by commercial banks as a tool to resolve their liquidity needs, and by various financial and non-financial firms to form a portfolio of securities.

Government short-term bonds are discount instruments, i.e. The investor's income is generated by the difference between the bond's redemption price (par value) and the purchase price, which is below par.

For example, an investor buys a one-year bond at a price of $950 and receives $1,000 at maturity. The amount of $50 will be the return on investment. Since money is lent, this income is often called interest income or simply interest. Just remember that in this case interest, or interest income, is an absolute value expressed in monetary units.

Government short-term bonds are the most reliable instruments of the securities market. They have an extensive secondary market and are highly liquid securities.

The Russian experience of issuing government short-term bonds is not yet very long. On February 8, 1993, Decree of the Government of the Russian Federation No. 107 “On the issue of government short-term zero-coupon bonds” (GKOs) was issued. According to the resolution, a global certificate is issued for the entire release. Bonds are not issued to the owners, and the registration of bondholders is carried out on the basis of records in “depo” accounts in the institutions of the Central Bank or organizations authorized by the Bank of Russia.

On May 18, 1993, the first auction for the sale of GKOs was held at the Moscow Interbank Currency Exchange (MICEX). From 1993 to 2004, more than 170 issues of state bonds were carried out.

By Decree of the Government of the Russian Federation No. 790 of October 16, 2000, the operating conditions of the GKO market were slightly changed compared to the original requirements. The issuer of GKOs on behalf of the Russian Federation is the Ministry of Finance. The Central Bank is the general agent for servicing GKO issues, but the decision to issue is now made without the consent of the Central Bank (unlike the original conditions).

In addition to GKOs, the Government of the Russian Federation issued some specific short-term securities, which essentially have no analogues in world practice. Thus, in accordance with Decree of the Government of the Russian Federation No. 321 of April 14, 1994, the Ministry of Finance issued treasury bills in 1994 for a total amount of 1.1 trillion rubles. These bills were used to repay state debt to enterprises. (It was supposed to pay off 10% of the state debt with bills.) Instead of 10 million rubles. the company was issued a promissory note in the amount of 14 million rubles. subject to repayment in a year. In other words, the profitability of the bill was 40% per annum, while interest rates on bank loans in 1994-1995 reached 200% per annum.

Treasury bills were issued in series: all bills in a series had a single issue and maturity date. The bills were transferred for storage to the Central Bank of Russia without being handed over to the owners. The owners of bills could only be legal entities - residents of the Russian Federation.

Treasury bills were not widely used, and already on August 9, 1994, Decree of the Government of the Russian Federation No. 906 “On the issue of treasury bills” was issued.

Government short-term zero-coupon bonds (GKOs)

The income from GKOs is a discount, i.e. the difference between the selling price (at redemption, this price is equal to the par value of the bonds) and the price of their acquisition during the initial placement or on the secondary market. The maturity of GKOs is up to 1 year. The face value of the bond is 1,000 rubles.

Federal loan bonds with variable coupon yield (OFZ-PK)

OFZ-PK refer to bonds with an unknown coupon income. Bonds with unknown (variable) coupon income give its owners the right to periodically receive interest (coupon) income. The frequency of coupon payments is 2 or 4 times a year. The size of each OFZ-PK coupon is announced immediately before the start of the corresponding coupon period based on the current yield of GKO issues, which are redeemed approximately at the same time as the date of payment of this coupon. At the same time, it is also possible to receive a discount if the purchase price of bonds (at the primary placement or at secondary auctions) is less than their sale price, including when the bonds are redeemed at their par value. The face value of the bond is 1,000 rubles. The circulation period of OFZ-PK is from 1 to 5 years.

OFZ-PD, OFZ-FD, OFZ-AD refer to bonds with a known coupon income. Bonds with a known coupon income (the amounts of which are announced in advance by the Issuer) are securities that give its owners the right to periodically receive interest (coupon) income. At the same time, it is also possible to receive a discount if the purchase price of bonds (at the primary placement or at secondary auctions) is less than their sale price, including when the bonds are redeemed at their par value.

Federal loan bonds with constant coupon yield (OFZ-PD)

In the case of OFZ-PD, the sizes of all coupons are determined as a constant value for the entire period until maturity. The circulation period of these bonds is from 1 year to 30 years, the frequency of coupon payments is once a year. Denomination 1,000 rubles.

Federal loan bonds with fixed coupon income (OFZ-FD)

In the case of OFZ-FD, the amount of coupon income is established upon issue as a fixed value, which may vary for different payment periods. The maturity of the bonds is more than 4 years, the frequency of coupon payments is 4 times a year. Denomination 10 or 1000 rubles.

Federal loan bonds with debt amortization (OFZ-AD)

This is a relatively new tool, first released in May 2002. The main feature of OFZ-AD is that the par value of the bonds is repaid in installments on different dates. The maturity of bonds can be from 1 year to 30 years (the nearest maturity year for bonds currently in circulation is 2006). The frequency of coupon payments is 4 times a year. Denomination 1000 rubles.

Although the full coupon amount is paid by the issuer of bonds to the person who owns them on the payment date, or coupon date, each previous owner is also entitled to receive income in proportion to the period of ownership. This is achieved by the fact that when purchasing bonds, their buyer must pay the previous owner, in addition to the actual price (the “net” price) of the bonds, also the amount of the accumulated coupon income.

Characteristics of GKOs and OFZs
	GKO	OFZ-PK	OFZ-PD	OFZ-FD	OFZ-AD
Full title	Government short-term zero-coupon bonds	Federal loan bonds with variable coupon yield	Federal loan bonds with constant coupon income	Federal loan bonds with fixed coupon income	Federal loan bonds with debt amortization
Known/unknown coupon income	zero coupon bonds	unknown coupon bonds		bonds with a known coupon yield	bonds with a known coupon yield
Determining the coupon size	-	announced before the start of the coupon period based on the current yield of GKO issues	as a constant value for the entire period until maturity	is set upon issue as a fixed value, which may vary for different payment periods
Issuer	Ministry of Finance	Ministry of Finance	Ministry of Finance	Ministry of Finance	Ministry of Finance
Issue form		documentary with mandatory centralization. storage	documentary with mandatory centralization. storage	documentary with mandatory centralization. storage	documentary with mandatory centralization. storage
Type of bond	personalized zero coupon	personalized coupon	personalized coupon	personalized coupon	personalized coupon
Loan currency	Ruble	Ruble	Ruble	Ruble	Ruble
Denomination, rub.	1000	1000	1000	10 or 1000	1000
Deadline	up to 1 year	from 1 year to 5 years	from 1 year to 30 years	more than 4 years	from 1 year to 30 years
Coupon payment frequency	-	2 or 4 times a year	1 time per year	4 times a year	4 times a year
Placement and circulation	MICEX	MICEX	MICEX	MICEX	MICEX
Possibility of receiving a discount	Yes	Yes	Yes	Yes	Yes

GKO
STATE TREASURY OBLIGATIONS; GKO(full title
- government short-term zero-coupon bonds) - uncertificated government securities issued on the basis of Decree of the Government of the Russian Federation dated February 8, 1993 No. 107 “On the issue of government short-term zero-coupon bonds.” The issuer of GKOs was the Ministry of Finance. The decision to issue GKOs was made by the Ministry of Finance in agreement with the Central Bank. The sales of GKOs to their first owners took place at a discount from their nominal value (discount). The nominal value of GKOs is 1 million rubles. Redemption of GKOs was carried out in non-cash form by transferring to their owners the nominal value of GKOs at the time of redemption. Income on GKOs was considered the difference between the sale price of GKOs by its owner to a third party (as well as the redemption price) and the purchase price of GKOs by the first owner. The Central Bank is the general agent for servicing the issue of GKOs. It regulated, in agreement with the Ministry of Finance, the issues of placement and circulation of state bonds. All placement and circulation operations, including settlements and accounting of GKO owners, were carried out through Central Bank institutions or authorized organizations (hereinafter referred to as dealers) determined by the Central Bank. Each issue of GKOs was issued with a global certificate stored in the Central Bank. Owners of GKOs can be legal entities and individuals. Based on the instructions of the Central Bank dated August 17, 1998. No. 31 b/1-y operations with GKOs were suspended. In accordance with Decree of the President of the Russian Federation dated August 25, 1998 No. 988 “On some measures to stabilize the financial system of the Russian Federation” and Decree of the Government of the Russian Federation dated August 25, 1998 No. 1007 “On the redemption of government short-term zero-coupon bonds and federal loan bonds with a constant and variable coupon income with maturities until December 31, 1999 and issued before August 17, 1998." The Ministry of Finance and the Central Bank developed a program for refinancing state bonds and federal loan bonds. Instructions for repayment were sent to authorized dealers of the Central Bank. Belov V.A.

Encyclopedia of Lawyer. 2005 .

Synonyms:

See what "GKO" is in other dictionaries:

GKO- state regulatory body; state and regulatory body Source: http://www.mtk.bishkek.gov.kg/E Gov%20%2008.07.2003%20UNDP.htm GKO clay acid treatment GKO state short-term government bonds... ... Dictionary of abbreviations and abbreviations

- (GOKO), see State Defense Committee. * * * GKO GKO (GOKO), see State Defense Committee (see STATE DEFENSE COMMITTEE) ... encyclopedic Dictionary

See Government bonds short-term zero coupon Dictionary of business terms. Akademik.ru. 2001... Dictionary of business terms

- (GOKO) see State Defense Committee... Big Encyclopedic Dictionary

- (GOKO), see STATE DEFENSE COMMITTEE. Source: Encyclopedia Fatherland ... Russian history

Noun, number of synonyms: 2 bond (14) obligation (25) ASIS Dictionary of Synonyms. V.N. Trishin. 2013… Synonym dictionary

GKO- [geka o], uncl., female (abbr.: government short-term bond) and cf. (abbr.: state treasury obligation) ... Russian spelling dictionary

GKO- Government short-term bonds. Pronounced [ge ka o]... Dictionary of difficulties of pronunciation and stress in modern Russian language

GKO- [ge ka o], unchanged, m. State Defense Committee (1941-1945). ◘ State Defense Committee is an extraordinary highest state body. BES, 329. Members of the military councils were connected with the Central Committee of the party, with the State Defense Committee, and carried out their directives. IKPSS, 482. Cf. GOKO... Explanatory dictionary of the language of the Council of Deputies

An ambiguous term State Defense Committee: State Defense Committee (USSR) State Defense Committee of the People's Republic of China State Defense Committee (DPRK) State Defense Committee (CRI) State securities: ... ... Wikipedia

Books

• State Defense Committee of the USSR. Regulations and activities. 1941-1945 Annotated catalogue. In 2 volumes. Volume 2. 1944-1945, . For the first time, the Russian State Archive of Socio-Political History is undertaking a comprehensive publication reflecting the activities of the State Defense Committee as the highest body of military-political power in the years...

In non-documentary form (in the form of entries on accounting accounts). The general agent for servicing GKO issues was the Central Bank of the Russian Federation.

GKOs were issued for different periods - from several months to a year - in separate issues in accordance with the “Basic conditions for the issue of government short-term zero-coupon bonds of the Russian Federation”, approved by Decree of the Government of the Russian Federation of February 8, 1993 No. 107. For each issue, restrictions for potential owners. The issue was considered completed if during the placement process at least 20% of the number of government bonds expected to be issued was sold. Unsold GKOs could be sold later. It was also possible to buy GKOs ahead of schedule on the secondary market.

The implementation and functioning of GKOs are usually associated with the names of Andrei Kozlov, who in 1992 headed the securities department of the Central Bank of the Russian Federation, and Bella Zlatkis, who from 1991 to 1998 served as head of the Department of Securities and Stock Market of the Ministry of Finance of the Russian Federation.

Income was formed as the difference between the redemption price (par value) and the purchase price.

The basis of the economic model of GKOs was the mechanism of a financial pyramid, similar to the operation scheme of MMM. According to Mikhail Khazin, “This was the largest financial scam in all post-Soviet times.”

Encyclopedic YouTube

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  At the initial stage, the demand for GKOs was low due to high inflation and the closed nature of GKOs to foreigners. The amount of proceeds from the sale of state bonds in 1994 amounted to 12.8 trillion rubles. In 1997 - 32 trillion rubles, of which 44.2% was aimed at covering the budget deficit. As of January 1, 1998, the total volume at par of outstanding GKOs was 272,612 billion rubles. By 1998, the GKO market had become the main source of financing the Russian budget deficit. The Russian government, through subsidiaries of the Central Bank, created additional demand for GKOs at the expense of funds received from the same market. This ensured the confidence of foreign investors in the reliability of the GKO instrument and the replenishment of Russia’s gold and foreign exchange reserves with the currency that foreigners exchanged for rubles to purchase GKOs.

  In the period from May 1993 to September 1994, the face value of one bond was 100 thousand rubles, from October 1994 to December 1997 - 1 million rubles, from January 1998 - 1 thousand denominated rubles.

  Assessment of planning and consequences of the issue of state bonds

  A prosecutor's inspection by the Prosecutor General's Office of the Russian Federation and a special commission of the Federation Council showed that initially the very idea of ​​issuing GKOs was made with major miscalculations (from the point of view of the interests of the state and the national economy), which led to the significant enrichment of a large number of officials, oligarchs, and crime bosses.

  The first strategic mistake was that the bonds were short-term and highly profitable (up to 60%, with the norm for securities being 4-5%). Therefore, the funds received for them were completely unsuitable for investment in industry, agriculture and other areas of the economy that did not bring immediate returns and did not bring large profits (p. 115).

  The second tactical mistake was that the players in the GKO market received such large profits from speculation that it became pointless for them to engage in real production and high technologies - and they did not do this. Up to 70% of Western loans went not to the real sector of the economy, but to the virtual one - for speculation with GKO bonds (p. 116).

  Finally, when by December 1997 it became clear that the income from the placement of new GKOs was not enough to pay for the old ones, instead of emergency measures to strengthen the market, the opposite was done: restrictions on foreigners were lifted, and soon a third of all securities were in their hands. This made it possible to pump money out of the Russian Federation to other countries: bonds were sold at a price of 50-60% of the nominal value, and after a few months the state paid the owner the nominal value.

  On January 1, 1998, all restrictions on the export of capital were lifted, and instead of an influx into the Russian Federation, there was a strong outflow - all the money was taken out, the national currency depreciated, the GKO market collapsed, and a default occurred in August 1998. Everything happened in accordance with the “Concept for the Development of the Securities Market papers in the Russian Federation”, developed by A. Chubais, and signed by B. Yeltsin (p. 116).

  One of the reasons for the default was the theft of a targeted loan from the International Monetary Fund allocated to maintain the ruble exchange rate. The first part of the loan - 4.8 billion US dollars - was stolen after it was transferred from the USA, but even before entering the Russian Federation (p. 260-270). Many prominent figures were involved in this, including M. Kasyanov, B. Berezovsky, T. Yumasheva, R. Abramovich, S. Dubinin, owners of the banks SBS-Agro, Menatep (Khodorkovsky), Inkombank, United Bank, “Sobinbank”, “ONEXIMbank”, etc. (18 banks).

  A computer analysis of transactions (concluded in the purchase and sale of bonds) carried out by the Prosecutor General's Office showed that speculation in the GKO market led to the enrichment of about 780 high-ranking government officials who did not have the right to engage in such “commerce” at all, and other prominent figures. Among them: A. Chubais, Minister of Foreign Affairs A. Kozyrev, Minister of Education and Science Tikhonov, Deputy Chairman of the Central Bank Aleksashenko and Mozharov, almost all Deputy Ministers of Finance, First Deputy Minister of Defense Mikhailov, Deputy Prime Minister Serov, Yeltsin’s daughters Tatyana and Elena ( pp. 119-120). The Russian Central Bank and its head S. Dubinin also began to buy GKOs - with the money they issued. At the same time, they and the Ministry of Finance did not take any measures to prevent the looming obvious catastrophe. From 1993 to the end of 1998, the internal debt of the Russian Federation increased from 16 billion rubles to ~756 billion rubles (in 5 years it increased 47 times).

  Having received information about what happened, the reasons and participants, Prime Minister Primakov took a position of non-interference (p. 121).

  Another concept from the 1990s may return to Russia: the Russian Ministry of Finance is considering the possibility of using the mechanism of government short-term bonds (GKOs) next year. This was stated by the First Deputy Minister.

  “Starting this year, we are creating a REPO - placement of budget funds even for one night. And, probably, we will again restore, if necessary, the GKO instrument. Because when you can place money for one day, you also need to be able to borrow for a very short time,” Nesterenko explained at a meeting of the Budget and Tax Committee.

  “For now, the possibility of issuing such securities is only being discussed theoretically,” the Ministry of Finance told Gazeta.Ru.

  As the department noted, the GKO instrument can be used directly by the Treasury to cover its short-term liquidity needs. Such needs may arise if the volume of funds placed on deposits with commercial banks and repo transactions increases.

  GKOs may also be required for liquidity management. “The Treasury may need it two or three times a year - on days on which very large one-time payments occur and for which it is necessary to keep around 600 billion rubles. always on the federal budget account. The introduction of such a short-term instrument will allow us to reduce the average level of balances in treasury accounts and place more funds additionally on financial markets through treasury deposits in repo transactions,” Siluanov’s department told Gazeta.Ru. “The instrument is not considered as a debt instrument - as a source of covering the budget deficit, it will not replace other types of borrowing,” the Ministry of Finance explained.

  The return of GKOs is due to the difficult economic situation in the country, as well as the closure of access to foreign capital markets, summarize experts interviewed by Gazeta.Ru.

  “The Ministry of Finance is now thinking about where to find funds for the investment program, which were previously financed through external borrowings,” the deputy head of the financial market committee told Gazeta.Ru. “Given the small budget deficit, we have the opportunity to close it with the help of short-term liabilities. At the same time, we cannot follow the example of the United States, where external debt exceeds 100% of GDP. A reasonable level is no more than 30% of GDP and no more than 3% of the budget deficit. Moreover, it is advisable to formalize the restriction legislatively, for example, by fixing it in the Budget Code. Then there will be opportunities to finance investment programs and economic growth.”

  The chief economist of BKS also agrees with Aksakov in his assessment of the reasons for the return of state bonds. “The need for state bonds arose because the political situation between Russia and the West changed, which negatively affected the ability to borrow on world markets,” Tikhomirov notes. — The income gap can be covered in two ways: reducing expenses or making up for missing income. The government will try not to waste the Reserve Fund in order to minimize risks. Taking into account the fact that external borrowing is impossible, it turns out that we are talking about increasing internal debt - state bonds.”

  Back to 1998

  Government short-term bonds (GKOs) began to be issued in the Russian Federation in May 1993 and were the prototype of US Treasury bills. State bonds were issued for a short-term period and were intended to cover the state budget deficit.

  GKOs were initially issued with a nominal value of 100,000 rubles, later their nominal value was increased to 1 million non-denominated rubles. The investor received income due to the fact that GKOs were sold at auctions at a discount, that is, at a price below par. The Ministry of Finance redeemed the bonds at par in a non-cash form - transferred the money to the owner’s account. The income was the difference between the nominal value of GKOs and the price of their acquisition at an auction during the initial placement or on the secondary market.

  Bonds were issued with maturities of 3, 6 and 12 months (at first only for three and six months, then the Ministry of Finance increased the share of bonds with longer maturities, and in the first half of 1997 completely got rid of three-month securities). Due to the fact that GKOs were issued for a short-term period in alternating series, the issuer of bonds (i.e.) had a real opportunity to repay previous series by issuing new ones.

  “In the early 1990s, we lived with a chronic deficit; the budget was actually financed by state bonds - and with high returns. It was a kind of “pyramid” when new ones were issued to pay off previous issues,” Tikhomirov comments on the then policy of the Ministry of Finance.

  In 1995, net budget revenues from the sale of GKOs, minus the costs of repaying previous issues, amounted to 28 trillion non-denominated rubles, which made it possible to finance more than 50% of the federal budget deficit. In 1996, proceeds from the placement of GKOs reached more than 50 trillion rubles.

  By the end of the 1990s, the GKO market became the main source of financing the Russian budget deficit. However, in 1997, against the backdrop of the economic crisis in Asia and falling oil prices, the situation in the Russian financial market became more complicated.

  As a result, by mid-August 1998, the yield on GKOs reached 140%, and the government was forced to default on them on August 17.

  “If the government enters the domestic debt market, it will pull financial resources away from the corporate bond market, complicating debt and investment problems in the real sector of the economy,” Tikhomirov notes. — State bonds will be issued in the presence of the Reserve Fund, that is, given that the government has funds that ensure its solvency in addition to future income. In the 1990s, the situation was completely different: huge debt, almost complete absence of reserves: the government had no reserves at all.”

  “Generally speaking, we need to use all mechanisms - look for opportunities for new income, optimize expenses and use the borrowing mechanism,” notes the head of Gazeta.Ru. “But here you need to act carefully: the more the state borrows, the less opportunities there are for corporate borrowing, since the market is single. At one time, the GKO mechanism worked like a “pyramid,” but this outcome was clear long ago, at least nine months before it happened. In general, I don’t think that the Ministry of Finance needs to fuss now.”