The stakes are pulling in different directions – Newspaper Kommersant No. 67 (7512) dated 04/18/2023

The yield spread between short and long OFZs widened to a monthly high, approaching 4 pp. The spread is widening against the backdrop of both a decline in yields on short bonds and an increase in yields on long issues. Short notes are affected by the current low inflation, which has approached the level of 3%. At the same time, regular placements of long OFZs gradually raise their yields. At the same time, experts expect the market to stabilize in the near future, and further movement of rates will be determined in June-July.

On Monday, April 17, at the auctions of the Moscow Exchange, the spread between the shortest and longest OFZ issues widened to its maximum value, amounting to 386 bp. p. A month ago it did not exceed 314 bp. The increase in the difference in rates is facilitated by both a decrease in the yield of short bonds and an increase in the yield of long issues. According to the Moscow Exchange, on Monday the yield of the shortest four-month OFZ issue for the first time since the beginning of February fell below the level of 7% per annum, having lost 58 bp since the beginning of the month. At the same time, OFZ yields due in May 2041 increased by 15 bp. p., up to 10.85% per annum.

Yields of all short and medium-term issues are declining, but less significantly. Since the beginning of the month, the rates for bonds with maturities up to a year have decreased by 24-66 bp. p., up to 7.89–7.84% per annum, up to five years – by 31–33 b.p. p., up to 7.83–9.64% per annum. Analysts at Otkritie Research believe that the key factor that had a positive impact on these releases was the publication of data on the execution of the federal budget for March, in which the filling of revenues and the pace of spending became more balanced. Over the month, the execution took place with a small surplus compared to a significant excess of expenses over income in the first two months, especially in January. “The probability of tightening the monetary policy of the Bank of Russia against this background has significantly decreased, and this has led to some reassessment of the fair yield on short and medium-term government bonds,” experts say. The decrease in inflation in Russia also speaks in favor of this. According to the chief analyst of the BC “Region” Alexander Yermak, due to the high base of last year, it dropped to 3% in annual terms in early April.

The widening of the spread is also facilitated by the high interest in short-term securities on the part of investors. “The market remains highly uncertain, and not all investors are ready to take the risks of long securities. Therefore, the main demand is concentrated in short-term securities,” says investment strategist of Arikapital Management Company Sergey Suverov.

At the same time, the pressure on the yield of long-term OFZ issues is exerted by the active offer of such securities at the auctions of the Ministry of Finance. Since the beginning of the year, the ministry has been placing only long issues of government bonds. For three and a half months, it sold such securities totaling about 900 billion rubles. According to Alexander Yermak, the rates on such securities could have grown even stronger if the Ministry of Finance had not begun to limit the premium for investors, cutting off most of the aggressive bids, or even refuse to hold the auction, declaring it failed due to “the lack of bids at acceptable price levels “.

Due to the fact that the market does not expect changes in the borrowing policy from the Ministry of Finance, high spreads between short and long securities will remain at the maximum level, but further expansion is not expected. “It is unlikely that the spread will expand much further, as it is already well above the historical average. In addition, the continued placement of long-term securities by the Ministry of Finance is largely included in the price,” Sergey Suverov notes. It is possible that the current interest rates in the debt market may remain in the near future, “and the certainty of further movement until the end of the year of the OFZ market and the ruble bond market as a whole may appear no earlier than June-July of this year,” Alexander Yermak notes.

Vitaly Gaidaev