OFZ Weekly Flows - December 27, 2021. Approaching Year-End With Six Consecutive Weeks of Outflows

During the week ending last Friday, international accounts pulled R28 bln from the OFZ market. This pushed the nonresident share down 0.2 pp to 19.6%, the lowest level since late July. Similar to the previous week, short-term fixed-coupon papers saw the most intense selling, which amounted to R12 bln. That was probably a reflection of elevated local demand for placing ruble liquidity over the upcoming holidays. However, we think geopolitical concerns and year-end reduction of risk were also at play, as other parts of the curve were also better offered. In particular, R12 bln fled medium-term issues and R5.5 bln long-term ones.> In terms of individual market segments, the foreign share dropped to 39.3% in the 5y-10y nominal bucket (a low since mid-August, the corresponding share as of end-2020 was 49.8%), to 22.4% in the 10y+ bucket (also a low since mid-August, 28.4% at end-2020) and to 21.2% at the very front end (a YTD low, it was 27.2% as of end-2020). All in all, we estimate the current international positioning in nominals as underweight to market-weight relative to benchmark indexes. In the CPI-linkers, the foreign share is wrapping the year near 8.8%, also a YTD low (15.5% as of end-2020).> Judging by the NSD data, some international accounts were likely reallocating from the 3y OFZ 26227 (July 2024, R11.7 bln weekly outflow) into the 4y OFZ 26229 (November 2025, +R7.1 bln), from the 14y OFZ 26233 (July 2035, R9 bln) into the 13y OFZ 26225 (May 2034, +R5 bln) and from the 10y OFZ 26218 (September 2031, -R5.5 bln) into the 10y OFZ 26239 (July 2031, +R3.9 bln). > Last week, the CBR reported official data on international flows in November. According to it, foreign holdings ticked down R106 bln m-o-m to R3.2 trln. That almost completely mirrors the earlier updated estimate of the NSD, which put it at R107 bln. The nonresident market share finished November at 20.5%, which is 2.7 pp below the level at the beginning of the year.