OFZ Auction Results - June 16, 2021. Demand for 10y Unsurprisingly Softer than Last Week

Today's OFZ auction marked the first since the new US sanctions on the primary OFZ market kicked in. We find the results neutral or even weakish and expect a limited impact on the secondary market. The bids and placement were lower than at recent 10y auctions, though this could have been expected given that US accounts are now cut off from the primary market. The yield premium was in line with our expectations and did not look outsized given that it was the first auction without foreigners and the first offering of a new 10y issue. A highlight from today was that the Finance Ministry preferred not to sacrifice price for a larger allocation. That said, the market was trading in the red in the run-up to the auction, so the premium was wider if compared to the levels when the auction announcement was made yesterday.> The new, on-the-run 10y OFZ 26239 (July 2031) attracted R45 bln in bids, and the Finance Ministry placed R24.1 bln out of the R30.0 bln on offer (for context, last week's 10y auction saw R148 bln in bids and R61 bln placed) at an weighted-average yield of 7.30%. The latter implies a circa 6 bp yield premium to the secondary market just before the auction, but was 10 bps higher than the auction-announcement levels. The demand was concentrated, as the three largest accepted bids took up two thirds of the entire placement; 99% of the placed volume went through at 7.30-7.31%.