State loan in one hand – Newspaper Kommersant No. 24 (7469) dated 02/09/2023

At the last OFZ auction, the Ministry of Finance attracted the minimum amount of funds over the past five months. At the same time, the main volume fell on the “long” issue, but thanks to one large application. The Ministry of Finance did not have to pay a premium, without which previous placements could not do. The further situation on the market will depend on the reaction of the Bank of Russia to increased budget expenditures.

On Wednesday, February 8, the Ministry of Finance limited the OFZ auction to only two issues with a constant coupon – with maturity in August 2029 and in July 2036. Aggregate demand amounted to 85.2 billion rubles, and the placement volume did not exceed 40 billion rubles, which is one and a half times lower than the previous auction day and the worst result since September last year.

The most demanded was a longer issue of government bonds. Demand for them amounted to 65 billion rubles, but the Ministry of Finance placed two times less – by 32.5 billion rubles. According to market participants, 32 bids were satisfied, and one of the largest bids accounted for more than 40% of the placement.

The weighted average yield was 10.57% per annum, which is 10 basis points higher than the placement level of these securities two weeks earlier and the highest level since November 2022.

When placing seven-year bonds, demand was lower and amounted to only 20.25 billion rubles. At the same time, the Ministry of Finance took a tougher stance, satisfying about a third of demand (by 7.4 billion rubles). The weighted average yield decreased by 10 basis points compared to two weeks ago. p., up to 9.8% per annum. In total, 61 applications were satisfied, and none of them reached 1 billion rubles.

Both placements were held with a minimum premium to the secondary market. According to Dmitry Monastyrshin, chief analyst at PSB, the premium for the first issue by Tuesday’s close was 2 bp. p., according to the second, she was absent altogether. “With a relatively small demand, the Ministry of Finance apparently decided not to borrow much by increasing the premium, but to wait for the improvement in the market situation,” Mr. Monastyrshin believes. However, as Maksim Chernega, head of the DCM department of the corporate finance department at Tsifra Broker, notes, “considering the volume of placements, the growth of the rate on the current scale is not critical.”

Caution of market participants caused by the latest data on the execution of the budget. According to preliminary estimates, the budget deficit in January amounted to 1.76 trillion rubles, that is, 60% of the annual plan of 2.9 trillion rubles.

“The huge budget deficit at the beginning of the year suggests that the Ministry of Finance may resort to borrowing through OFZs more intensively and to a greater extent than is currently planned. In the medium term, this will put pressure on yields along the entire curve,” says Evgeny Vorobyov, head of the credit analysis department of Ingosstrakh-Investments Management Company. According to Vladimir Malinovsky, head of the debt market analysis department at Otkritie Investments, market participants would probably like to take a break until new data and official comments appear.

The growth of government spending increases inflationary risks, which may affect the statements of the Central Bank, which this Friday will hold a meeting of the Board of Directors at a key rate. Most analysts expect the rate to remain at 7.5%.

“Investors decided to wait for the decision on the rate, as well as updated economic forecasts and comments from the regulator,” said Dmitry Monastyrshin. According to Vladimir Malinovsky, investors would also like to hear the reaction of the Bank of Russia to the preliminary results of the federal budget for January and to understand whether the regulator’s position has become a little more hawkish, and therefore, to assess the likelihood of tightening the monetary policy at future meetings.

Under the current conditions, according to Maxim Chernega, major players prefer to “park” liquidity in short-term securities, which the Ministry of Finance does not offer. It would be interesting for banks and floaters (bonds with a floating coupon), which do not carry interest rate risk for their holders. But placement of such securities on the market is not yet expected. “Perhaps the Ministry of Finance will return to borrowing through floaters in the medium term, when the situation with the key rate and budget filling becomes clearer,” Evgeny Vorobyov believes.

Vitaly Gaidaev