OFZ Auction Results - April 14, 2021

At today's auctions, the Finance Ministry placed R384 bln of OFZs, breaking a record set two weeks ago. Thus, in just the first two weeks of April almost 50% of the entire local borrowing plan for 2Q21 has been fulfilled, while already R1.25 trln has been raised now YTD. Most of the demand today, judging by the bid breakdown, again looks to have come from the largest local banks. Nevertheless, the Finance Ministry's fulfillment of its borrowing program should reduce market fears about the still-high borrowing needs this year (in our last FI quarterly, we wrote that the pressure from primary supply should ease in the near future). Overall, we regard the results of today's auctions as positive.> Today's auction for the 7y OFZ 26236 (May 2028) attracted more bids than the previous auction for the same paper (R259 bln versus R244 bln on March 31). However, the ministry placed a smaller volume today (R171 bln versus R201 bln on March 31). The bid-to-cover ratio therefore climbed from 1.2 to 1.5. The cut-off was set at 7.08%, or 7 bps above the secondary-market level prevailing before the auction. Large bids predominated at the auction, with the largest bid filled coming in at R40 bln, while there were also several bids at R30 bln and R20 bln.> Demand at the second auction, for the 10y OFZ 26235 (March 2031), was comparable to the first auction, coming in at R251 bln, while R213 bln was placed at a cut-off of 7.23% (a 3 bp yield premium). Interestingly, a group of bids for R135 bln of the issue was satisfied at prices that differed by less than 0.1 pp in price, which may indicate demand came from a single participant.