Primary Market
MinFin held an auction to place OFZ 26206s today. This auction was less successful than the previous two featuring 26205s though the result was fairly expected, given the preliminary guided yield range of 7.45-7.50%. This assumed a discount of around 4 bpts at the time of announcement. Less than positive news from Europe this week affected the situation too. Nevertheless RUB18.8bn of bonds (94% of the planned offer of RUB20bn) were placed at a weighted average yield of 7.49% (a 1 bpt discount to the higher end of the range), while the cut-off yield was 7.50%. The book was 1.4x oversubscribed.
Observations and Recommendations
There was a slight correction on the OFZ market over the past week and trading activity was modest. Average yield widening reached 9 bpts (vs average compression of 34 bpts a week before), while the price fell 0.3 points on average. We do not consider this decline a turnaround of the short-term trend but rather a temporary respite before two-to-three more weeks of growth. However, further growth is unlikely to be as rapid as in January due to the potentially negative news flow from external markets and approaching presidential elections in Russia. In terms of relative value we think that all issues are close to their ‘fair’ levels with the exception of OFZ 26203, which seems to be a little bit overbought.
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