OFZ Auction Results - April 28, 2021

Today's auctions were mixed. Overall, demand was not impressive, which could be partially explained by the low activity of local accounts ahead of the long May holidays next week. That said, the main highlight today was that the Finance Ministry provided almost no yield premium at the 10y auction despite the chance to the place the entire amount on offer. This demonstrates that the ministry has grown more flexible in its primary market operations amid already-solid progress in fulfilling the local borrowing plan and the recent R875 bln cut to the 2021 target (about R50 bln per week must be raised for the rest of the year now, on our estimates).> The 14y OFZ 26233 (July 2035) attracted bids of only R24.5 bln, falling short of the R25 bln offered. The ministry ultimately placed R21 bln at a weighted-average yield of 7.21%. We estimate a 4 bp yield premium to the secondary market, which is the largest premium seen at an auction for a long-dated fixed-coupon issue since February 10. The placement volume was distributed in small lots, with the largest satisfied bid coming in at R1.3 bln (which was also the bid with the lowest yield submitted, of 7.14%). The non-competitive share was large, at 34%. > The second auction, where R25 bln in the 10y OFZ 26235 (March 2031) was offered, proved more upbeat. In particular, while only R9.7 bln was placed, bids came to R51 bln, covering the entire offer. The Finance Ministry, however, refused to sacrifice price for volume and set the cut-off yield level at 7.12%, almost flat to the secondary market. There were only 19 accepted bids, with the five biggest taking up only half of the placement. Noncompetitive bids accounted for 45% of all the bids.