OFZ Weekly Flows - September 6, 2021. Recent Trend of Investors Extending Duration, Buying New OFZs Remained

The inflow of nonresidents into OFZs over the past week totaled R51.3 bln. The recent trend of investors extending the duration of their portfolios and buying new OFZs remained in place. The breakdown by segment shows outflow of R9.4 bln from short-dated paper, but inflows of R36 bln in medium-dated paper and of R24 bln in long issues. Given the short week in the US and also ahead of Friday's CBR meeting, we think market activity will be light this week, which should entail more modest movements in nonresident flows. However, we think that inflows into the "new" OFZs will continue (the nonresident share in certain issues already exceeds 30%).> Inflows totaled R51.3 bln over the past week, according to NSD data. The most significant inflow came in the 5y OFZ 26207 (R18.3 bln), while the 8y OFZ 26237 saw R11.7 bln enter and the 10y OFZ 26239 saw R15.2 bln. The biggest outflows were recorded in the 5y OFZ 26226 (R8.3 bln) and 1y OFZ 26209 (R3.8 bln).> R92 bln auctioned off last week, without significant premium. The Finance Ministry's borrowing needs until the end of the year now appear quite modest. In order to meet the plan and if the current pace of issuance is sustained, it would take just 5-6 more auctions (not including possible additional issuance to cover the buyback of floating-coupon paper). (continued on next page)We continue to think that in a few weeks the Finance Ministry may return to setting offer limits, which will support long-dated OFZs (see our most recent OFZ Auction Results note). > On our estimates, the nonresident share in OFZ market climbed 20 bps to 20.82% last week. We do not expect this figure to significantly change this week.