The Ministry of Finance placed OFZ with a variable coupon, but cut off most of the applications

At the first OFZ auction in the new quarter, the Ministry of Finance offered government bonds with a floating coupon, which were popular among bankers, but despite the high demand from issuers, it rejected most of the bids. Against the backdrop of increased oil and gas budget revenues, the Ministry of Finance can afford to take a tough position, especially since the volume of borrowings until the end of the year has been reduced by 1 trillion rubles. Market participants are now expecting the placement of OFZs with a fixed coupon, which may be in demand against the backdrop of a rise in the key rate.

New quarter on the borrowing market Ministry of Finance decided to start from the placement of OFZ with a variable coupon (OFZ-PK, floater). Thus, the issuer met halfway the largest investors – banks, who noted their interest in such securities. In particular, in September, the head of VTB, Andrei Kostin, stated that the bank was ready to buy only floaters.

The Ministry of Finance placed the issue in full – 750 billion rubles, so analysts expected high interest in these government bonds. Based on the results of collecting applications, demand amounted to almost 158 ​​billion rubles, which is one third higher than the last placement of similar securities. However, the Ministry of Finance satisfied less than a third of applications – only 43 billion rubles.

The high volume of unsatisfied applications indicates their aggressiveness. According to Andrey Kulakov, head of the fixed income analysis department at Gazprombank, the premium provided was 60 basis points (bp), at the level of the latest auctions. He also notes the high concentration of applications. “Of the 63 approved applications, the share of the three largest was 94%, the share of the largest was 65%,” he notes.

Investor demand for floaters is associated with risk a further increase in the key rate and statements by the Central Bank about the need to maintain a tight monetary policy for a long time. “To return inflation to the target of 4%, it will probably be necessary to maintain a strict monetary policy throughout 2024,” said Central Bank Deputy Chairman Alexei Zabotkin on October 2, speaking at the Federation Council. Sovcombank analysts do not rule out that on October 27 the Bank of Russia will raise the key rate by another 100 bp. p., up to 14%.

“Taking into account our inflation forecast for the end of the year of 7.5%, we believe that at the last meeting of this year on December 15, the Central Bank will again raise the key rate by another 100 bps. p., up to 15%,” noted Sovcombank chief analyst Mikhail Vasiliev.

At the same time, against the backdrop of growing oil and gas budget revenues and the Ministry of Finance cutting plans, analysts are waiting for a return to the practice of borrowing classic OFZs. In particular, revenues from the sale of oil and gas in September increased by 15%, to 740 billion rubles. The expected volume of additional oil and gas revenues in October, according to the Ministry of Finance, will exceed 513 billion rubles. Moreover, last week Finance Minister Anton Siluanov already warned that the domestic borrowing program for this year will be reduced by 1 trillion rubles. This was a response to the increased appetite of bankers for higher rates when placing government debt. “The Ministry of Finance does not want to further significantly increase the share of floaters in the portfolio and take on increased interest rate risk,” says Mikhail Vasiliev. Therefore, in his opinion, he will continue to offer investors long classic OFZs and linkers (OFZs with a floating par value.— “Kommersant”) and will not offer yield premiums to the secondary market above 10 bp. P.

Vitaly Gaidaev