Local sovereign debt: MinFin is in play
Yesterday, as we expected, the Ministry of Finance announced that today it would be offering RUB 15bn of RFLB 28 (YTM 9.40%). However, the news caught the market by surprise as prices slipped a tad after the announcement. The mess with the capital controls has also produced a visible negative effect on the market, since the share of non-residents remains high. However, at the end of the day longer-dated OFZs had lost just 25-40bp in price, which resulted in a 4-5bp yield widening and some curve steepening as the front end remained unchanged. Overall, we think today’s auction could be a success again, since the market has been undersupplied for months. Meanwhile, MinFin has announced the auction schedule for 4Q14. The total quarterly offering size would be RUB 200bn, which looks okayish given the looming RUB 139bn redemptions. However, so far in 2014 MinFin has borrowed only RUB 49bn on a net basis. Duration wise, the ministry is going to focus on the belly and front end, with only RUB 40bn reserved for 15-year bonds.
Maxim Korovin, Tatyana Zueva
VTB Capital analyst
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