OFZ Auction Results - November 10, 2021. Strongest Results Since September

The Finance Ministry today resumed fixed-coupon auctions after a two-week pause. The results were encouraging: the entire offer size of R40 bln was digested without yield premiums to the secondary market. Underscoring the market's conviction that the market has more room to rally from here, 90% of all satisfied bids at the 10y auction were non-competitive, which is an abnormally high share. While we agree that long OFZ yields should decline over the next 6-12 months, we remain wary of risks that inflation could remain elevated over the near term, which could trigger pullbacks on the way down. > The 10y OFZ 26239 (July 2031) elicited bids totaling R88 bln, the largest volume since September 1. The R20 bln offer was covered in full. The weighted-average yield was 8.01% and the cut-off was 8.02%, which even implied a small yield discount to the secondary market. There were 46 bids accepted. Interestingly, the five largest satisfied bids, which accounted for almost two-thirds of the allocation, were non-competitive.> The 15y OFZ 26240 (July 2036) collected R35 bln in bids, the highest level since August 25. This was sufficient to allocate the entire offer volume of R20 bln without any concession to the secondary market. The weighted-average yield was 8.01% and the cut-off was 8.03%. The biggest filled bid was R7 bln. The non-competitive share reached 17%.