OFZ Auction Results - February 2, 2022. Auctions Resume on a Strong Note

Today's auction was the most successful since early September 2021, in our view. We think demand came almost entirely from local accounts and likely was broad-based in terms of investor types, judging by the structure of bids. It seems that many local market participants expect a stable or improving geopolitical news flow. While the results of the auction should add a tailwind to the ongoing rally in OFZs in the short term, we are still not convinced that the rally has much more room to run - not only because of the geopolitical uncertainty, but also because of the high probability of further front-loaded CBR rate hikes.The 7y OFZ 26237 (March 2029) collected R103 bln in bids (a high for all OFZ auctions since September), which allowed the Finance Ministry to place R74.7 bln (also a high since September) without a yield premium to the secondary market. The weighted-average yield was 9.59%. The placement was allocated across 109 satisfied bids, and there was no unusually heavy bias toward the largest bids: the five largest made up 50% of the total (the biggest ticket was R10 bln). In our view, this is a sign that, besides large local banks, smaller banks were also participating, as were local real money accounts and retail accounts. The share of noncompetitive bids was 30%.