Primary Market
The Ministry of Finance successfully placed the OFZ 26205 issue (96.7% of the offer size, or RUB33.9bn) today. The guided coupon range was 8.30-8.40% while the bond was placed at a weighted average yield of 8.25% (5 bpts below the low end of the range) with demand amounting to nearly RUB200bn. The amount of bonds outstanding thus stands at nearly RUB80bn.
Observations and Recommendations
The OFZ market continued to grow over last week: the average z-spread to swaps decreased by 14 bpts and average price growth reached 65 bpts. In our view the success of the auction confirms the view that growth could continue further. The key market participants seem to agree with this idea as they provided large bids (11 bids over RUB1bn at today’s auction). We believe that growth will continue along the entire OFZ curve. Since its current form does not clearly highlight any underpriced issues, it makes sense to concentrate on issues with longer durations.
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