OFZ Weekly Flows - May 17, 2021

Nonresidents began returning to the OFZ market in May. The past week saw a net inflow of R17 bln, which brings the inflow since the beginning of the month to R30 bln. We recall that due to the lag in settlement these figures do not reflect what was likely an outflow following the US April inflation report last Wednesday. Against this backdrop the next batch of National Settlement Depository (NSD) figures might show a bout of selling at the beginning of this week. For the return of nonresidents to the market to be more lasting, a positive trigger would be needed. This could be a drop in volatility in global markets or a slowdown in Russian inflation. However, given that EM debt generally posted gains during the first part of May thanks to the positive market backdrop - and Russia was on holiday during this period - the relative attractiveness of Russia's local debt grew in comparison with the debt of many EM peers.> NSD data shows net inflow of nonresidents totaling R17 bln. The largest net inflow came in short-dated paper (R13.5 bln), followed by medium-dated paper (R5 bln), whereas long-dated issues saw a small outflow. Looking at specific issues, the 3y OFZ 26227 (July 2024) saw the biggest inflow at R10.6 bln, while the 4y OFZ 26234 (July 2025) and 7y OFZ 26236 (May 2028) each saw around R7.4 bln come in. The biggest outflow, meanwhile, was in the 8y OFZ 26224 (May 2029), which saw R5.6 bln exit, while R4.9 bln was removed from the 10y OFZ 26218 (September 2031). > OFZ issuance at weekly Finance Ministry auctions totaled R45 bln. This is just a few billion rubles under the weekly average issuance that would be needed for the Finance Ministry to meet its plan for the year (we estimate the weekly volume needed at R50-55 bln). > NSD data shows nonresident share climbing 6 bps to 18.8% over week of May 10-14. The share of nonresidents in nominal OFZ paper climbed 4 bps to 28.95%. We think that if this week the Finance Ministry auctions off roughly the same amount as last week, the nonresident share likely will not change much. > CBR data shows nonresident outflow of R121 bln from OFZ market in April. According to the CBR data, meanwhile, their share dropped 1.8 pp to 20.9%. We recall that the NSD showed a slightly higher outflow of R131 bln.