OFZ Weekly Flows - September 13, 2021. Nonresident Inflows Slowed Down Ahead of CBR Meeting

Last week, nonresident inflows in the OFZ market unsurprisingly slowed down (to just R14.9 bln) ahead of the CBR meeting. However, the trend of investors increasing the duration of their holdings continued: short-dated OFZs saw net outflow of R5.2 bln, medium-dated paper saw inflows of R6 bln, while the long end saw inflows of R16.8 bln. Inflows into the "new" issues continued, particularly in the 15y OFZ 26240. Following the CBR meeting (see our note), we maintain our view that the trends of increased duration and of inflows into "new" OFZs are set to continue.> Nonresident inflows come in R14.9 bln over the last week. The largest inflow came in the 5y OFZ 26226 (R8.9 bln), the 14y OFZ 26233 (R7.9 bln) and the 15y OFZ 26240 (R6.2 bln). The largest outflow, meanwhile, was in the 5y OFZ 26207 (R12.8 bln) and the 2y OFZ 26215 (R4.8 bln).> Demand at last week's auctions significantly lower than at previous ones, only around R12 bln was placed. It appears that market players opted not to risk buying relatively illiquid papers ahead of last Wednesday's Russian inflation report and the Friday CBR meeting. However, the premia offered at the auctions were small - a sign that price is becoming a more significant factor than volumes for the Finance Ministry. It is thus logical to assume that sometime in the new few weeks the ministry will return to auctions with volume limits (see our OFZ Auction Results note). > Nonresident share in OFZ market up 10 bps to 20.9%, on our estimates. This was due to the low issuance at last week's auction amid continued nonresident inflows. As the Finance Ministry approaches its borrowing target, we think issuance at the auctions is set to decline going forward. Against this backdrop, we expect the nonresident share in the OFZ market to increase more significantly.