OFZ Auction Results - January 12, 2022. CPI-Linker Auction Fares Better Due to Link Lag

Today's OFZ auctions were a mixed bag. The nominal auction was, unsurprisingly, disappointing, whereas the auction for the CPI-linker was among the strongest in several months. The success of the latter could be attributed to the impressive inflation carry of linkers - their principals are to increase by almost 3% in January-March, as they incorporate the October-December monthly inflation prints. For that reason, and with no signs that domestic inflation has started materially slowing, we prefer CPI-linkers over nominal OFZs for the time being.> The 7y OFZ 26237 (March 2029) collected R38 bln in bids, the lowest volume since September. There was R16.5 bln placed, in line with the last auction for the bond in mid-December. The weighted-average yield was 8.94%, corresponding to a tiny 2 bp premium to the pre-auction level (though 9 bps above the level at the time the auction was announced). The noncompetitive share was above-average at 69%. > The second auction, for the CPI-linked 11y OFZ 52004 (March 2032), was the bright spot, with R26 bln in demand (the highest since October and versus R9.8 bln at the last auction in November) and R12 bln placed (versus just R1.0 bln in November) at a 3.09% weighted-average yield (flat to the secondary market).