Demand exceeds favor – Newspaper Kommersant No. 170 (7371) of 09/15/2022

The Ministry of Finance held the first placement of federal loan bonds (OFZ) since the beginning of February and attracted the entire planned amount of funds in the amount of 10 billion rubles. at the start of the year. The ministry did not need to attract large investors and pay an increased premium to the secondary market. In the fourth quarter, analysts expect the issuer’s activity to increase, which will be facilitated by high interest in securities from the market and massive OFZ redemptions in November and December.

After a seven-month break, the Ministry of Finance entered the public debt market with placements: on September 14, investors were offered the issue of ten-year bonds with a constant coupon income (OFZ-PD) in the amount of 10 billion rubles. Test placement turned out to be in demand.

The final demand almost 2.5 times exceeded the supply, which made it possible to sell the entire proposed issue with a yield of 8.98% per annum with a weighted average of 8.94% per annum. That is, the placement took place on the terms of January 2022.

The last time the Ministry of Finance held two OFZ auctions was on February 9, the total demand amounted to 85 billion rubles, of which 29% were satisfied. After the outbreak of hostilities in Ukraine, the freezing of assets of foreign investors and a sharp increase in rates, a temporary suspension of placements was announced. But the growing budget expenditures, which significantly exceeded the revenue side in the summer months, combined with the decline in OFZ yields, returned the interest of the Ministry of Finance to the debt market.

Back in early June, at SPIEF, Minister Anton Siluanov did not rule out entering the domestic borrowing market after the definition of a new design of the budget rule. In early September, Deputy Finance Minister Timur Maksimov said that the state would return to the debt market by the end of the month. On September 12, the ministry officially confirmed plans to place OFZs in the amount of up to 40 billion rubles.

Analysts note that it was not necessary to attract large investors to the placement. “During the auction, 80 bids were satisfied, of which 12 large ones accounted for 63.6% of the placed volume. At the same time, the maximum volume of the application amounted to only 878 million rubles, and another 11 applications were submitted in the amount of up to 500 million rubles,” explains Alexander Ermak, Chief Analyst of Fixed Income Markets at BC Region.

For the full placement of the proposed bonds, the Ministry of Finance had to provide investors with a small premium. According to Mr. Yermak, it amounted to 5 bp. to the secondary market, which corresponds to the average level of premiums (at the beginning of the year they were in the range of 2-8 bp). “A relatively high premium on the cut-off yield, which amounted to 9 bp. etc., testifies to the rather aggressive nature of applications from the majority of investors,” notes Mr. Yermak.

The auction had little effect on the secondary market. Yields on mid-term and long-term issues decreased by 2-4 bp. p., up to 7.84–8.65% and 8.68–9.04% per annum.

The volumes of placements announced by the Ministry of Finance, Vladimir Evstifeev, head of the analytical department of Zenit Bank, believes that they do not create risks of an overhang of supply in the government securities market.

At the same time, in the fourth quarter, as the liquidity of the banking sector recovers, OFZ issuance volumes may increase. “The Ministry of Finance will probably continue to place 10–20 billion rubles each. per auction depending on market conditions. The exception will be auctions coinciding with large redemptions of government bonds,” believes Dmitry Gritskevich, manager for the analysis of banking and financial markets at PSB.

So, on November 16, the OFZ will be redeemed for 212 billion rubles, and on December 7 – for 350 billion rubles. According to Mr. Gritskevich, more than half of the redeemable volume can return back to the market through placements. At the same time, the Ministry of Finance is mainly expected to offer government bonds with a maturity of five to ten years. These are the most liquid OFZs on the market, which are in high demand, explains Vladimir Evstifeev. The share of securities with a maturity of up to five years, in his opinion, will decrease, the share of longer-term issues will increase.

Vitaly Gaidaev