Fixed Income. OFZ Weekly Flows - August 9, 2021. Nonresident inflow remains elevated

Last week saw a R41.2 bln net inflow of nonresident money into the OFZ market, which meant a total of R190 bln over the past three weeks, during which trading volumes were relatively high. The inflows were again concentrated in the belly (which saw a R36.1 bln inflow) and at the long end of the curve (a R20 bln inflow), while the short end witnessed outflow (of R14.6 bln). The "new" OFZs saw net inflow of R27 bln last week, having significantly lagged the "old" issues in inflow over the weeks prior. We prefer the "new" OFZs to the "old" ones, as they trade with a 15 bp premium to the curve in the secondary market (see our recent report). Meanwhile, the short end of the curve should receive some support - amid the increasingly hawkish rhetoric from the CBR - from the R290 bln redemption on August 18. We expect the inflow of foreign money to continue, though the share of nonresidents is likely to climb only slowly given that the Finance Ministry has been stepping up its issuance. > According to the NSD, last week saw a R41.2 bln net inflow of nonresident investment. The biggest inflows were in the 8y OFZ 26237 (R13.8 bln), 9y OFZ 26235 (R13.2 bln) and 15y OFZ 26240 (R10 bln). The largest outflows were registered in the 3y OFZ 26227 (R9.4 bln) and 1y OFZ 26209 (R4.4 bln).> Finance Ministry places R76 bln at last week's auction. Issuance again exceeded R50 bln, the average amount the ministry needs to place per week to meet the borrowing target for this year. Once again, no significant yield premium was provided. In our view, OFZ issuance is likely to remain high this week (see last week's OFZ Auction Results).> According to our estimates, based on NSD data, the share of nonresidents in the OFZ market climbed 9 bps to 19.9% last week. The share of nonresidents in nominal issues alone rose 15 bps to 30.8%. We do not expect the share of nonresidents in the OFZ market to show an especially sharp uptick this week - we expect it to end the week at around 20%.