OFZ Auction Results - September 22, 2021. Full Placement Goes to Single Participant

Today, the Finance Ministry opted for a very cautious offering, holding a single auction for R15 bln in the September 2025 OFZs. The results were encouraging: the volume was placed in full with a smaller-than-usual yield premium over the "old" OFZ curve. The entire placement went to a single participant, which suggests that a major market player thinks the current rate-hike cycle in Russia is coming to an end. In addition, the decision by the Finance Ministry earlier in the week to radically cut the auction offering seems to already be bearing fruit, as OFZs have recouped nearly all of their losses from Monday. Should auctions with volume limits continue (at clips of R15-30 bln per auction), this could open the door for a further tightening of long OFZ yields. Overall, the Finance Ministry is far ahead of its annual borrowing plan, meaning it can be patient in the primary market. In these conditions, the attractiveness of "new" 15y and 20y on-the-run issues will rise - they had felt the most pressure from new supply, which had led to steepening at the very far end of the curve.Bids totaled R38 bln at today's auction. The full offer of R15 bln was taken up by a single investor with only one accepted bid. The weighted-average and cut-off yield was 7.14%, which corresponds to a 6 bp yield premium to the "old" curve. This is a solid result, as the "new" issues have typically been initially placed at an 8-15 bp premium.