Primary Market
MinFin changed today's auction paper and offered OFZ 26205s, which were successfully placed a week ago. Despite the replacement, the issue was almost completely placed (99% of the offer size, or RUB34.6bn) within the guided range of 7.75-7.80% (7.76% weighted average yield). The book was oversubscribed by ‘just’ 2.7x today vs 5.5x last week. We consider this impressive, taking into account that the yield of the OFZ 26205, which has been auctioned for the second week in a row, has fallen 50 bpts.
Observations and Recommendations
As we expected last week, the OFZ market has continued to grow rapidly. The trading volumes have been concentrated in medium and long durations, which have demonstrated the largest price appreciation – average growth was 1.4 ppts with average yield compression of 34 bpts. We still see no clear favorites in terms of relative value and believe that growth will continue along the entire curve. Thus we prefer bonds with longer duration. However, we do not expect the market to continue to grow so rapidly and anticipate a pause in late February – early March.
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