Primary Market
The OFZ 26206 issue was placed successfully but only in terms of formal indicators: 91% of the offered amount was sold, with a yield of 8.0% and an average price of 91.01. However, in reality we believe the placement involved an off-market deal given that the bond traded at 97.6/97.8 just after the auction (5-10 bpts higher in yield than the auction levels). We suspect that a major OFZ market participant may have bought a sizeable volume of the 26206 issue at an off-market price.
Observations and Recommendations
Yesterday we closed our positions in 25077s and 26203s with a cumulative return of 2.4% in a week (see page 3). We think the potential for mid-term bonds is already minimal. Substantial political pressure in Russia following the parliamentary elections and the possibility that investors’ rosy expectations may not be met by the EU summit on Friday are both negative for mid/long-term OFZ issues. While the former may be overblown, risk remains with respect to Europe, which could easily spoil a potential Christmas rally.
Back
