OFZ Weekly Flows - September 27, 2021. Last Week Sees Significant Inflow into Only One Issue

Last week, the external backdrop - namely expectations about the Fed decision, followed by harsh rhetoric from the BoE and ECB - put pressure on EM bonds, and OFZs were no exception. Thus, nonresident inflows slowed; another factor in this was renewed US sanctions rhetoric in relation to the secondary OFZ market (see our daily story from Thursday). Still, the "new" 10y OFZ 26239 managed a pronounced inflow. Recall that R325 bln has already been placed in the issue versus a limit of R500 bln, which makes it the leading candidate to be the first "new" OFZ to be included in bond indexes. Looking ahead, we believe that this week flows will remain balanced: inflows into the "new" issues are likely to continue, while the "old" issues should see a resumption of inflows when the external backdrop stabilizes. > As expected, nonresident inflow was minimal last week at R6.3 bln. The 10y OFZ 26239 saw a considerable inflow of R31.5 bln, followed distantly by the 20y OFZ 26238 (R2.3 bln) and 13y OFZ 26225 (R2.0 bln). Meanwhile, outflows were seen in the 10y OFZ 26218 (R12 bln), 5y OFZ 26219 (R5.3 bln) and 10y OFZ 26235 (R3.8 bln).> Finance Ministry takes cautious approach at auctions, offering only R15 bln in September 2025 issue. If auctions with set placement limits continue (with an offer of R15-30 bln at each auction), a further narrowing of spreads is possible at the long end of the curve. Note that the Finance Ministry is running ahead of its yearly borrowing plan, meaning it can afford to be patient with issuance (see our auctions recap from last week).> Nonresident share of OFZ market remains about flat at 21.1% last week, on our estimates based on NSD data. We expect the share to hold around that level this week as well.> CBR publishes more complete nonresident holdings data for August, including local depositories (unlike NSD data). The CBR reported a nonresident inflow into the OFZ market of R147 bln in August (the NSD data had shown a R174 bln inflow; the difference could also be attributed to a lag in the settlement of operations). As of today, the nonresident inflow for September, according to NSD data, amounts to R88 bln.