OFZ Auction Results - June 24, 2021. Local Investors Prefer 8y over 20y Nominals

Yesterday's auctions left a mixed impression. The total allocation barely exceeded half of the R50 bln offered due to weak demand for the 20y bond. By contrast, the 8y paper was placed in full. The yield premiums were modest in both cases and did not exert any pressure on the secondary curve. As long as the 12y+ segment of the curve remains as flat as it is right now, local demand for the very long end of the curve will likely remain tepid, in our view.> The first paper on offer was the 20y OFZ 26238 (May 2041). Bids totaled R19.5 bln (in line with the latest 18y auction two weeks ago), and only R7 bln was placed out of R30 bln offered. The weighted-average yield was 7.28%, 8 bps above the secondary yields of the previously longest outstanding fixed-coupon bond, the 18y OFZ 26230 (March 2039). The entire placement volume was likely distributed among small accounts: 136 bids were filled, with the largest one reaching R750 mln. Interestingly, this bid was the lowest in terms of yield, at 7.24%. All other bids were submitted at 7.26% or above.> Bids for the 8y OFZ 26237 (March 2029) totaled R30 bln, allowing the Finance Ministry to allocate the full R20 bln on offer. The weighted-average yield was 7.11%, which was around 8 bps over the off-the-run curve. Demand was more concentrated than in the 20y auction: the four largest bids filled accounted for 70% of the allocation.