OFZ Weekly Flows - January 10, 2022. Flows Minimal Last Two Weeks; Outflows Now Expected to Intensify

In the last week of December (December 27-30), despite the improvement in market sentiment given the announced NATO-Russia talks set for the beginning of January, investors took profit and a nonresident outflow of R13 bln was recorded. In the period of January 3-7, the OFZ market was illiquid and the nonresident positions did not change significantly, both in terms of individual issues and in aggregate. We expect that, against the backdrop of a rising geopolitical premium in the region combined with a global decline in risk appetite amid an increasingly hawkish Fed, nonresident outflows could intensify, with the nonresident share in the OFZ market possibly falling below 19.3%.> Nonresident outflow of R7.8 bln in short-dated OFZs last week, R4.9 bln outflow in belly, flat at long end. The largest outflow came in the 7y OFZ 26237 (R3.1 bln), followed by the 6m OFZ 26209 (R2.6 bln) and the 10y OFZ 26239 (R2.4 bln).> First-quarter borrowing plan implies R64 bln per week in OFZ issuance. At the end of December, the Finance Ministry published its domestic borrowing plan for 1Q22: R700 bln is slated to be issued in the quarter. For comparison's sake, the plan for 4Q21 was R520 bln, of which only half ended up being placed. There are 11 auctions planned in 1Q22, which means that an average of R64 bln per auction week would need to be placed to meet the plan. > The ministry intends to focus on OFZs in the 5-10y segment, where around R350 bln is guided to be placed. The long end is expected to see R300 bln, while the short end will see R50 bln.> Nonresident share in OFZ market at 19.5%. In the context of increased geopolitical risks and deterioration in the external backdrop, we think that nonresident selling could prevail, while the Finance Ministry will likely place a volume below its weekly target this week, meaning the nonresident share should drop below 19.3%.