The Ministry of Finance does not want to pay a high premium to investors

In unfavorable market conditions, the Ministry of Finance set strict standards for the placement of public debt – as a result, the OFZ auction with a constant coupon was declared invalid. When placing more popular OFZs with a variable coupon, 40% of applications were satisfied. In anticipation of a further increase in the key rate, investors do not want to take on the interest rate risk of classic papers, but are ready to accumulate liquidity for rare placements of floaters. These papers, analysts believe, will remain the main source of raising funds until the end of the year.

On August 9, for the first time in six months, the Ministry of Finance refused to place bonds with a fixed coupon. Auction for OFZ-PD maturing in May 2038 recognized failed due to “lack of bids at acceptable price levels”.

Kommersant’s interlocutors in the debt market admit that the yield premium requested by investors could have exceeded the previous values ​​by several times. The last time the Ministry of Finance canceled an auction on classic papers was in February this year; in March, one OFZ auction with a variable denomination was declared invalid.

In recent months, the demand for classic issues has been steadily declining and in July-August it only sometimes exceeded 20 billion rubles. Expectations of a further increase in the key rate, as well as a weakening of the Russian currency, forced investors, primarily banks, to put up more aggressive bids at government bond auctions.

“This increases the likelihood of tightening the monetary policy, which further reduces the attractiveness of classic OFZs,” said Andrey Kulakov, head of the fixed income analysis department at Gazprombank. PSB Chief Analyst Dmitry Monastyrshin believes that at the September meeting the Bank of Russia may raise the rate by another 100 bp. to 9.5%, and by the end of the year it can reach 10%.

The second auction for the placement of OFZ with a floating coupon passed more predictably, although the issuer also showed toughness. The volume of demand exceeded 230 billion rubles, showing the second result this year. However, the Ministry of Finance satisfied less than half of the applications – only 94.3 billion rubles. Andrey Kulakov points out that the premium to the RUONIA rate (56 bp) remained at the level of the previous auction (55 bp). “The concentration of applications was quite high, out of 49 approved applications, the share of the five largest was 70%, the share of the two largest was 38%,” notes Mr. Kulakov.

The OFZ-PK coupon rate rises as RUONIA and the Central Bank’s key rate rise, and therefore banks are more willing to buy such securities.

Vladimir Evstifeev, head of the analytical department of Zenit Bank, draws attention to the fact that on Wednesday the balance of the Central Bank’s operations with banks for the first time in almost a month exceeded the level of 1 trillion rubles. “Banks accumulated liquidity against the backdrop of an increased likelihood of a key rate increase in September, as well as before the placement of a twelve-year float,” Mr. Evstifeev believes.

Meanwhile, next week, analysts do not rule out a surge in demand, including for classic papers, as two OFZ issues for a total of 487 billion rubles will be redeemed next Wednesday. But even in this case, investors may demand a larger discount to the price of such securities. “Current securities would be of interest to investors at a cost of 92% of the face value, this would be of interest to the bulk of investors. Given the development of events, it is possible that at the next auction it will be necessary to give 91-91.5% of the face value or cancel it, ”says Maxim Chernega, head of the DCM department of the corporate finance department at Tsifra Broker.

However, analysts do not expect a recovery in demand for classic securities at least until the September meeting of the Central Bank. “Prior to the understanding of the approximate ceiling for the key rate in the current cycle of tightening monetary policy, classic OFZs will probably enjoy only moderate demand,” Vladimir Evstifeev believes. According to Dmitry Monastyrshin, the Ministry of Finance will most likely be able to provide 10-15% of the borrowing program this quarter with classical papers. In the previous quarter, OFZ-PK accounted for over 57% of the total volume of placement (836 billion rubles).

Vitaly Gaidaev