OFZ are issued by the Ministry of Finance of Russia on behalf of the state. They are the most creditworthy rouble debt on the domestic market: the obligations are backed by the federal budget, and OFZ yields serve as the benchmark against which every other rouble issue is priced. The gap between a corporate bond's yield and that of an OFZ of the same maturity is the credit spread — what the investor is paid for taking on a particular issuer's risk.
OFZ are placed at auctions held by the Ministry on a schedule published quarterly. The auction sets the price at which the state raises money; from then on the issue trades on the exchange and its price follows ordinary market forces. The issuer cannot redeem an OFZ early — these issues carry no put option.
Several varieties exist and they behave differently. Fixed-coupon OFZ pay a rate known for the entire term and pass every change in interest rates through to the price. Floating-coupon OFZ tie the coupon to the RUONIA rate, so their price stays near par while income rises with rates. Inflation-linked OFZ index the face value itself. Amortising OFZ repay the face value in instalments on a set schedule.
Coupon income on government bonds has been taxed on general terms since 2021, while certain reliefs tied to the holding period remain available. The purchase date matters for the actual result: accrued interest paid to the seller reduces the taxable base when the coupon is received.
