New issue of OFZ entered the market with a premium from the Ministry of Finance

Banks that have exhausted the limits on the redemption of OFZ issues already in circulation received a new one. Its placement provided half of the proceeds from the latest auctions, which totaled more than 75 billion rubles. However, the Ministry of Finance had to pay an increased profitability premium. If the achieved results are maintained, next week the ministry may fulfill the quarterly plan for borrowing.

Finance Minister Anton Siluanov’s proposal to state-owned banks to participate more actively in OFZ auctions, made at SPIEF, affected the results of the latest government bond placements. At auctions held on Wednesday, June 21, the issuer placed bonds of three not-so-popular issues in the amount of 75.2 billion rubles. This is 29% lower than the previous week, but higher than the average volume of funds raised this quarter. The repetition of this result next week will allow the issuer to fulfill the quarterly plan for borrowings.

Contrary to the expectations of market participants, the lowest interest among investors was caused by the medium-term issue of OFZ with a constant income (OFZ-PD with maturity in August 2029). In the second quarter, this issue was the most popular among classic papers against the backdrop of tougher rhetoric from the Central Bank. However, at the last auction, the total demand did not reach 27 billion rubles, of which the Ministry of Finance satisfied applications for only 16.8 billion rubles. This is the minimum volume of placement of securities of such urgency since March. The weighted average yield premium, according to Andrei Kulakov, Head of the Fixed Income Analysis Department at Gazprombank, amounted to 4 bp. p. to the level of Tuesday’s close.

The volume of placement of OFZs with a variable denomination amounted to 22 billion rubles. with demand of 25.4 billion rubles. This is only 15% and 5% less than the result of the previous similar auction. At the same time, as Alexander Yermak, Chief Analyst for Fixed Income Markets of BC Region, notes, the results of the auction determined three large bids at a price of 95% of the face value, which accounted for 99.9% of the total volume of placement. Against the backdrop of rising pro-inflationary risks, the Central Bank is tightening its rhetoric and is louder and louder about a possible increase in the key rate in the near future. “Under such conditions, papers with a fixed coupon are not in demand,” says Alexander Afonin, head of the bond market analysis at Sinara Bank.

However, the market was surprised by the increased interest in the new OFZ-PD issue due in May 2038. In recent months, investors have not favored long-term securities offered by the Ministry of Finance; at the last three auctions for the placement of OFZ-PD (with maturity in 2041), the demand was 12-30 billion rubles, the placement volume was 6-19 billion rubles.

Demand for the new issue reached almost 60 billion rubles, while the volume of placements amounted to 36.4 billion rubles. Higher interest in securities of maximum maturity was only in February of this year.

True, in order to satisfy the heightened interest, the Ministry of Finance had to pay a premium, which, according to Mr. Yermak, amounted to 5 bp. n. against 3 b. n. at an auction three weeks earlier.

“It is possible that the auction could be supported by the effect of a new issue, which, in turn, could solve the problem of the large participants’ limit on the purchase of already actively placed securities,” Andrey Kulakov notes. The existence of such a problem last week, in response to criticism from the Ministry of Finance, was stated by the head of Sberbank German Gref. Sberbank and VTB did not promptly respond to Kommersant’s request for participation in past auctions.

However, market participants believe that the main demand for the new issue was provided by smaller players. This, in particular, is evidenced by the number of satisfied applications and their size. According to Alexander Yermak, a total of 283 applications were satisfied, 16 of which were the largest with a volume of up to 2.4 billion rubles. accounted for 85% of the total volume of placement. In addition, the day before, “sales of long-term OFZs were noted, which led to a noticeable decrease in prices. It is possible that some investors were preparing liquidity for a new issue, for which the Ministry of Finance usually gives a higher premium than for those in circulation,” notes Alexei Tretyakov, head of Arikacapital. In conditions of low premiums to the market, according to Maxim Chernega, head of the DCM department of the corporate finance department at Tsifra Broker, banks participate in placements more out of respect for the Ministry of Finance than out of necessity.

Vitaly Gaidaev