OFZ Weekly Flows - July 19, 2021. Nonresident Flows Balanced

Last week, nonresident flows in the OFZ market were basically balanced, a R2.3 bln outflow being registered. The short end of the curve saw a R1.0 bln outflow and R3.3 bln left intermediate issues, while a R2.1 bln inflow was registered at the long end. Overall, as we had expected, activity has decreased as the summer drags on and ahead of the CBR decision this week. Against this backdrop, we believe that this week nonresident flows will remain balanced. We do not expect a significant change in the nonresident market share.> Nonresident outflow amounts to R2.3 bln last week. The largest inflow was registered in the 3y OFZ 26222 (R2.9 bln), followed by the 1y OFZ 26220 (R2.6 bln) and the 10y OFZ 26235 (R2.6 bln). The largest outflow was seen in the 6y OFZ 26207 (R7.6 bln) and the 1y OFZ 26209 (R5.0 bln).> Only R14 bln placed at OFZ auctions last week. The Finance Ministry kept the offer restrained at only R20 bln. Despite the fact that Euroclear began settling the "new" OFZ issues - i.e. those issued after the US primary-market sanctions came into force - demand at recent auctions has remained subdued.> Nonresident share of OFZ market flat at 18.90% (29.17% for nominal issues). Given that the Finance Ministry is limiting primary supply and trading activity is depressed, we do not believe nonresident positioning will change significantly this week.> CBR Financial Market Risks Review for May-June: After latest US sanctions, nonresident take-up at OFZ auctions decreased from 22.5% to 9.3%. The main buyers have been SIFIs (they took up 51.5% and 45.7% of the volume placed in May and June). In absolute terms, the volume of nonresident primary purchases in June rose by R13.4 bln to R41.3 bln (R27.9 bln in May), though 87% of that came at the two auctions on June 14 (the date the restrictions for US investors came into effect).> The same CBR report shows nonresident investors and foreign subsidiaries having been net buyers of OFZs in secondary market in May-June. The net inflow was R32.4 bln, of which 63.5% came in June (April saw a R56.4 bln outflow). In addition, other net buyers in May-June were SIFIs (R15.2 bln), while sellers were NFOs and smaller banks (outflows of R25.9 bln and R21.8 bln, respectively).