OFZ Weekly Flows - February 14, 2022. Nonresident Outflows Continue

As expected, nonresident money continued to leave the OFZ market ahead of Friday's CBR meeting amid a still volatile geopolitical background. The net outflow of foreign investment amounted to R21.3 bln. The CBR's rhetoric following the meeting was rather hawkish (see our CBR Review), which caused the pressure on the OFZ curve, particularly the short end, to intensify. We think the rest of the curve might come under heavier pressure as well, as historically such narrow spreads to the key rate have not lasted long. The geopolitical tensions, the persistently high inflation and the increasingly negative global backdrop (particularly after it was announced that the Fed Board of Governors would hold an unscheduled meeting today) will also continue to weigh on Russia's local sovereign debt. That all considered, we expect the share of nonresidents in the OFZ market to drop from 18.35% to 18.2% this week.> Nonresident outflow of R21.3 bln. Nonresidents pulled a net R20.7 bln from the short end of the curve, while the flows were more or less balanced further out. The issues that saw the biggest net outflows were three 5y issues: the OFZ 26226 (R9.2 bln), OFZ 26207 (R5.6 bln) and OFZ 26219 (R4.1 bln). Inflows were registered in the 6y OFZ 26212 (R2.7 bln), 13y OFZ 26233 (R1.3 bln) and 9y OFZ 26235 (R1.0 bln). > Finance Ministry places just R25 bln at last week's auction. This is around a third of the amount the Finance Ministry will need to place each week this year on average to hit its borrowing target for the year. The demand for the issue with a fixed coupon was high, but we think this was probably due to short positions being closed (see Wednesday's OFZ Auction Results). > Nonresident share drops 17 bps to 18.35%. We expect a further drop to 18.2% this week.