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Local sovereign debt: MinFin places RUB 1.1bn in the auction

Yesterday, the Ministry of Finance enjoyed RUB 8.2bn of demand in the RFLB 16 6.0 auction, but placed only RUB 1.1bn at an average rate of 15.27%, providing a marginal premium to the secondary market. However, the bond’s liquidity was relatively poor due to the lack of new supply lately, so speaking about any premium is hardly feasible. Meanwhile, we highlight that market repo rates for RFLB 16 6.0 are around 12.0%. Hence, even adjusted for the non-zero haircut, holding RFLB 16 6.0 at 15.27% is not a carry-negative. At the end of the day, the OFZ curve tightened 3-5bp on the long end and 15-20bp in the belly. In price terms, RFLB 19 6.70 (YTM 15.19%) gained near 0.4pp, while RFLB 28 (YTM 13.65%) inched up only 0.2pp. Hence, curve steepening continues, with the 5s15s spread now standing at -150bp vs. -200bp just a couple of weeks ago. We highlight that, compared with other EM markets, OFZ’s belly looks relatively cheap, so the steepening could well continue, especially if the CBR cuts rates.
Maxim Korovin, Tatiana Zueva
VTB Capital analyst


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