OFZ Weekly Flows - August 30, 2021. Nonresidents Continue to Build Positions in Long-Dated, 'New' OFZs

The net inflow of nonresidents into the OFZ market eased to R15.5 bln last week, ahead of Fed Chairman Jerome Powell's speech on Friday. The pickup in weekly inflation reported on Wednesday night may have been another factor. However, the main trends of the past month persisted - nonresident investors continued to switch from "old" to "new" issues and lengthen the duration of their holdings. The short end of the curve saw a R4.4 bln net outflow of foreign money, while the middle of the curve and the long end saw net inflows of R7.4 bln and R12.7 bln. This week is the last week before the CBR's blackout period ahead of the September meeting, so there is a good chance we will get some remarks from central bank officials on Russia's macroeconomic situation. We expect CBR representatives to make note of the still-elevated inflationary pressure, which could cause yields to move higher on issues 4y and shorter. We think the foreign inflows into "new" OFZs will continue.> NSD reports R15.5 bln net inflow of nonresident money last week. The biggest inflows were registered in the 10y OFZ 26239 (R21.5 bln), 14y OFZ 26233 (R12.6 bln) and 15y OFZ 26240 (R6.4 bln). The biggest outflows were from the 5y OFZ 26207 (R16.5 bln), 10y OFZ 26218 (R4.6 bln) and 10y OFZ 26235 (R4.2 bln).> Finance Ministry places more than R100 bln for fourth time in five weeks. The Finance Ministry placed more than R100 bln in total at last week's auction, for the fourth time in five weeks. If it were to continue borrowing at this pace, it would reach its annual borrowing target with plenty of time to spare (it still needs to place around R625 bln this year). With this in mind, we think the Finance Ministry could return to auctions with volume limits and cut back on yield premiums in September. This would support the "new" OFZs (see last week's OFZ Auction Results).> Share of nonresidents little changed at 20.6%. At the end of the week before last, the share of nonresidents in the OFZ market jumped due to a R290 bln redemption.> According to CBR, nonresidents added R172 bln to their OFZ holdings in July. The NSD had previously reported the increase in foreign holdings in July at R168 bln. It estimates the increase in August at R154 bln.