OFZ Weekly Flows - January 24, 2022. Nonresident Outflows Rise, as Expected

The outflow of nonresidents from OFZs last week amounted to R53.7 bln. Curiously, the NSD data showed a substantial nonresident outflow in the latter half of the week, reflecting trading on Tuesday-Wednesday, when nonresidents were selling but the market was recovering. This could suggest that many nonresidents continue to look for an opportunity to exit the market. Fundamental factors remain secondary for the market, which has shown heightened sensitivity to geopolitical headlines. We believe that the high volatility will continue. Overall, the share of nonresidents in the OFZ market by the end of this week could fall below 19% (taking into account the outflow from the end of last week, which is not yet reflected in the data due to the lag).> Last week's outflow at R53.7 bln. The nonresident outflow from short-term OFZs was R22.2 bln and from medium-term issues R29.6 bln, while again the long end of the curve proved the most resistant, with an outflow of only R1.6 bln. In terms of individual issues, selling prevailed in the 5y OFZ 26219 (R11.5 bln outflow), 9y OFZ 26235 (R10.3 bln) and 5y OFZ 26207 (R7 bln). An inflow was recorded in the 14y OFZ 26233 (R3.3 bln) and 6y OFZ 26212 (R1.2 bln).> With volatility elevated, Finance Ministry cancelled last week's auctions. In view of the ongoing high volatility amid geopolitical concerns, we believe the Finance Ministry will continue to pursue a defensive primary-market strategy in the near future.> Share of nonresidents dropped by 0.3 pp to 19.1%. We do not expect the Finance Ministry's offer at auctions to be significant until the market stabilizes, and we do not expect nonresident inflows to resume until the geopolitical backdrop improves. The share of nonresidents in the OFZ market could drop below 19% by the end of the week, in our view.