OFZ Auction Results - September 1, 2021. Streak of Solid Auctions Continues

We think that today's OFZ auctions will likely support market sentiment for the remainder of the week: R92 bln was placed total in the 10y and 20y OFZs, the placement size slightly less than at the previous five auctions (R105 bln average placed) - however, more important was that the Finance Ministry provided no tangible yield premiums today. Meanwhile, the amount the Finance Ministry needs to raise now before the year end is looking modest. In fact, at the current pace, only 5-6 auctions would cover it (excluding potential additional borrowing to buy back floaters). Thus, we continue to believe that the Finance Ministry could make the decision to switch back to auctions with set volume limits within several weeks, which should in turn buoy long-dated OFZs.> The auction for the 10y OFZ 26239 (July 2031) saw R137.4 bln in bids, while R67.4 bln was placed, for a bid-to-cover ratio of 2, in line with the last auction for the same issue two weeks ago. The weighted-average and the cut-off yield were 7.13%, nearly flat to the secondary market just before the auction. In addition, the share of noncompetitive bids was unusually large - a sign of healthy demand - at 41%. The largest accepted bid was R11 bln; the five largest took up 38% of the placement. The bond's outstanding size has now reached R280 bln (its size cap is R500 bln). > Bids for the 20y OFZ 26238 (May 2041) were expectedly lower at R36.3 bln, while R24.7 bln was satisfied, the bid-to-cover rising versus two weeks ago. The weighted-average yield was 7.41%, up 3 bps to the secondary market. The volume placed was distributed in small tickets not exceeding R3.5 bln among 93 bids.