OFZ Weekly Flows - December 20, 2021. Moderate nonresident outflows continue

Last week, nonresidents posted R21.1 bln worth of outflows. As would be expected prior to the CBR meeting, the main outflows came from short-dated issues (-R20 bln). In fixed-rate issues, medium- and long-dated paper saw inflows of a respective R2.4 bln and R3.0 bln. The long-dated segment continues to outperform thanks to the CBR's rhetoric, which now indicates that the likelihood of several additional rate hikes has decreased since the October meeting.On Friday, the CBR noted that the inflation environment was not improved and reiterated its 2022 inflation forecast at 4.0-4.5%. This was the fourth consecutive meeting at which the forecast was left unchanged. In order for its inflation forecast to come down, monetary policy would likely have to be tightened even further early next year. We expect the key rate to be hiked by another 50 bps at least in 1Q22. This would lead to an even steeper inversion of the ruble rate curves (see our latest CBR Review note). With the holidays just around the corner we do not expect significant changes in foreign flows. However, the nonresident share of the market could continue to decline due to further supply from the Finance Ministry. On Friday, Finance Minister Anton Siluanov said, despite borrowing for 4Q21 still lagging the quarterly plan, that the ministry would not change its borrowing strategy in the final weeks of this year> Nonresident outflows totaled R21.1 bln last week. The biggest outflows came from the 4y OFZ 26229 (-R5 bln) and the 6m OFZ 26209 (-R4.5 bln). The biggest inflow, meanwhile, was in the 10y OFZ 26239 (R8.5 bln). > Only R25 bln was placed at last Wednesday's auction. This result reflects the weak demand for medium- and long-dated paper. This appears entirely understandable given the uncertainty surrounding the weekly inflation print and what at the time was the upcoming CBR meeting. > Nonresident share up 0.5 pp to 19.7% thanks to R350 bln OFZ redemption. We do not expect to see any significant changes in the OFZ share this week.