OFZ Auction Results - July 7, 2021. Tepid Demand for Long OFZs
The Finance Ministry placed only three quarters of its (modest) offer at today's auctions. We think the recently worsened geopolitical backdrop and caution ahead of the upcoming June monthly inflation print were the key factors that weighed on demand. A silver lining, however, was that once again rather small yield premiums were offered. This, together with the small offer size, demonstrates the Finance Ministry's priority of price over volume - at least for the time being. This should remain a stabilizing factor for the OFZ market.> The auction for the 10y OFZ 26239 (July 2031) saw R18 bln in bids, down from R28 bln last week. The entire offer of R10 bln was placed at a weighted-average yield of 7.34%. This level implied just a 3 bp yield premium over the secondary market. The cut-off was 7.35%, which was also the level at which the largest volume was taken (R5 bln). > Demand for the 20y OFZ 26238 (May 2041) came to just R8.6 bln, and R5.4 bln was placed (out of R10 bln offered). The weighted-average yield was 7.40%, which corresponded to a 1 bp yield premium.
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