The Ministry of Finance held back investors – Newspaper Kommersant No. 208 (7409) dated 11/10/2022

On November 9, the Ministry of Finance attracted through OFZ the minimum amount over the past two months – 42 billion rubles, four times less than last week. The ministry changed tactics and became more active in cutting off aggressive requests from investors, satisfying just over 8% of demand. Due to significant budget expenditures, the Ministry of Finance will continue to actively borrow on the market, experts believe, but will limit the amount of the premium.

The unlimited OFZ auctions held on November 9 ended with records only in terms of demand. As in the previous two weeks, the Ministry of Finance offered three OFZ issues with a fixed coupon (OFZ-PD), a floating coupon (OFZ-PK) and a variable denomination, the size of which depends on the level of inflation (OFZ-IN). The total demand exceeded 537 billion rubles, which is 65% higher than last week and a record for one auction day. Less than 10% of demand was satisfied, for a total amount of about 42 billion rubles, which is four times less than the result of last week.

The main interest of investors was concentrated in OFZ-PD, the demand for which amounted to almost 308 billion rubles, which exceeded the amount of available balances by 2.4 times. The excitement was associated with the results of the previous auction, when the Ministry of Finance provided a record yield premium (see “Kommersant” dated November 3). “In anticipation of the issuer maintaining the tactics of conducting with a high premium, investors put up the maximum volume of bids for OFZs with fixed income,” said Alexander Yermak, chief debt markets analyst at BC Region. According to the chief analyst of Sovcombank Mikhail Vasiliev, in the hope of earning good money, investors could place orders significantly lower than secondary market prices.

But the Ministry of Finance was not ready to give a significant premium and satisfied only 45 applications for a total amount of about 16.2 billion rubles, cutting off about 95% of aggressive demand.

According to Alexander Yermak, 99.995% of the total volume was placed in the course of satisfying 32 “non-competitive” deals at the weighted average price, which was determined on the basis of 13 deals for the remaining amount of 812 million rubles. The cut-off price yield of 10.31% did not imply a premium to the secondary market. “The yield on the weighted average price of satisfied bids amounted to 10.18%, which is 17 bp. p. below the close on November 8, ”said Dmitry Monastyrshin, chief analyst at PSB.

Unsatisfied demand, according to market participants, was transferred to the second auction, in which the Ministry of Finance placed OFZ-PK. Demand for them amounted to 209 billion rubles. (86% of available balances), which is 20% higher than a week ago. But even here the Ministry of Finance cut off 91% of demand, satisfying only 13 applications for almost 18.64 billion rubles. at a weighted average price of 97.23% of the face value. “The cut-off price and the current weighted average price implied a premium of about 0.48 percentage points to the level of the secondary market the day before. Last week, the Ministry of Finance gave 0.54 percentage points,” said Alexander Yermak.

At the last OFZ-IN auction with a demand of 20.3 billion rubles. The Ministry of Finance satisfied applications for 7.1 billion rubles, which is a third less than last week’s result. The weighted average price was 93.41% of the nominal, the weighted average real yield was 3.35% per annum. “The floater and linker were placed in minimal volumes, this is a signal that the Ministry of Finance is not ready to borrow at high rates and will probably limit the premium within 10 bp in the future. etc.,” notes Dmitry Monastyrshin.

The Ministry of Finance had to mitigate the consequences of the “shock” placement of the previous week, says Vladimir Malinovsky, head of the debt market analysis department at Otkritie Investments, in order “not to plunge the secondary debt market into a state close to panic.” According to Rosbank analysts, a discount of several percentage points could lead to stratification between the primary and secondary OFZ segments. As a result, the results of the auction had a positive impact on the OFZ-PD secondary market, where the yields of long-term securities decreased.

The Ministry of Finance will continue active borrowing in the market, analysts say, but there will be no such premiums as last week.

“Until the end of the year, the ministry will continue its cautious tactics of placements with yield premiums within the standard 5–10 bps. But one-time increases are possible for the sake of maximizing the volume,” Mikhail Vasiliev believes. In his opinion, by the end of the year, the Ministry of Finance will be able to attract another 200-400 billion rubles.

Vitaly Gaidaev