OFZ Auction Results - August 25, 2021. Finance Ministry Could Soon Resume Auctions With Limits

The Finance Ministry managed to place more than R100 bln at its weekly auctions today for the fourth time in the last five weeks. Demand remained solid, with a total of R180 bln collected in bids for 8y and 15y issues offered. The fly in the ointment was that both bonds were tapped with a relatively large concession to the secondary market when taking into account that prices had been pushed lower in the run-up to the auctions. However, we think it is worth focusing on the broader picture: if the Finance Ministry continues borrowing at the recent pace, it should manage to complete its annual borrowing plan well in advance (around R625 bln remains to be raised). This likely means we should expect the Finance Ministry to return to auctions with set volume limits in September and seek to reduce yield premiums, which would in turn bode well for the "new" nominal OFZs.> Bids for the 8y OFZ 26237 (March 2029) reached R128 bln and R57.7 bln was placed. The bid-to-cover ratio was 2.2, up from 1.9 seen at the previous auction for the same bond on August 11. The weighted-average yield was 7.11%, corresponding to a 2 bp yield pickup versus the secondary market just before the auction, or 6 bps versus yesterday's close. Interestingly, there was no tail at all, the cut-off also being 7.11%. The noncompetitive bid share was untypically large, accounting for almost two thirds of the placement. Of all competitive bids, 99% were filled within a range of 7.09-7.11%, which suggests that most of the placed volume ended up on books of several large market participants.> At the auction for the 15y OFZ 26240 (July 2036), R49.3 bln was placed at a weighted-average yield of 7.39%. That corresponded to around a 2 bp yield premium to the secondary market, but 5 bps to Tuesday's level. Demand totaled R57.5 bln, down from R66.2 bln at the last auction for the paper two weeks ago. The share of noncompetitive bids was 24%.