OFZ Auction Results - July 28, 2021. Strongest Weekly Auctions Since April

This week's OFZ auctions - without set volume limits - proved strong, with the Finance Ministry placing R106.5 bln, the largest volume since mid-April. The 8y bond was better bid, as we had expected, though neither auction saw a significant yield premium. Overall, we think the auction results indicate that there is more fuel left in the tank for nominal OFZs longer than 5y to rally further. In addition, they should attract more international attention toward the new, on-the-run OFZs, which still remain relatively underinvested by foreigners relative to the old, off-the-run issues and offer generous yield premiums of 15-20 bps to the latter. For instance, the foreign share in the 8y bond (March 2029) was just 11% prior to the auction, versus 52% in the nearest off-the-run 8y (May 2029). > The 8y OFZ 26237 (March 2029) saw R96.4 bln in bids, the highest level for a nominal OFZ auction since before June 9. There was R70.5 bln placed at a weighted-average yield of 7.02%, almost flat to the secondary market before the auctions. The lowest yield was 6.98%. The largest accepted bid was R7.8 bln, though generally demand was diverse with 173 accepted bids. The share of non-competitive bids was unusually large at 41.7%. > Demand for the 15y OFZ 26240 (July 2036) amounted to R62.1 bln, and R36.0 bln was placed. The weighted-average yield was 7.21%. The three biggest filled bids were R5 bln each, one of them being non-competitive. The overall non-competitive share came to 34%. There were 228 accepted bids overall.