OFZ Auction Results - February 17, 2021

The Finance Ministry finally found demand for nominal OFZs at today's weekly auctions. This came following headlines that major local banks were ready to increase their purchases at auctions. At the auction for the 7y OFZ there were no more than two competitive bidders, while judging by the high share of noncompetitive bids at the auction for the 15y OFZ, investors seem to believe that its current yield levels are attractive and they went for volume instead of price. Today's placement of nominal issues (R81 bln) was the highest since June 16, when the ministry placed R151 bln.> The Finance Ministry placed R39 bln in the 15y nominal OFZ 26233 (July 2035) at a relatively modest yield premium of 3 bps to the secondary market at the time of the auction. Demand was up, with bids reaching R72 bln versus R25 bln the last time the issue was offered on February 3. The share of noncompetitive bids was high at 65%. It seems investors see current yield levels as attractive and wanted to get volume instead of fighting for price.> At the auction for the 7y nominal OFZ 26236 (May 2028), demand came to R86 bln, and R42 bln was placed, whereas two weeks ago the Finance Ministry had been forced to cancel an auction for the issue. Moreover, we do not believe there was a secondary premium. There were only five competitive bids, two of which were for R15 bln, meaning that no more than two participants formed the price at the auction. We think it may have been major banks.