Primary Market
The Ministry of Finance successfully placed the 26206 issue (97% of the offer) today. As we expected, most demand was concentrated at the high end of the range (60% of the issue was placed at 8.04%, with an additional 20% at 8.05%). After the auction we saw active deals in 26206s at yields of 8.01-8.03% As a result the base curve was in high demand.
Observations and Recommendations
At the moment we see the OFZ curve flattening: yields in one-year durations increased 2-4 bpts, while for long-term bonds they compressed by 10-30 bpts. We consider this a positive sign for long duration debt. On the other hand, we are surprised by the narrowing OFZ spreads (up to half a basis point) as this usually precedes a market correction. In our view, this may signal that market confidence is growing, although we believe the OFZ segment is locally overvalued due to thin liquidity.
Back
