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MinFin taps long end of OFZ curve; announces 2Q15 borrowing plan


Yesterday, the OFZ market traded on a softer footing. The curve moved up near 40-45bp along the whole curve. Hence, RFLB 28 (YTM 12.30%) lost 2.0pp in price, while bonds on the belly declined c. 1.5-1.7pp price wise. We think it was mainly weaker FX that ignited the correction in OFZs. Meanwhile, MinFin announced two auctions for today. The Ministry offers RUB 15bn of RUONIA-linked notes maturing in January 2020.

The previous auction took place at the beginning of March, and back then the average price was at 92.9pp, while we think the fair price of this bond is around 97-99pp. Hence, we still like the RUONIA-linked issue. In addition, MinFin is offering RFLB 28 today for RUB 5.0bn. The last time the bond was auctioned was back in early October 2014. We think demand will be decent given the lack of new supply recently and in the near future. Hence, yesterday MinFin announced new issuance plans for 2Q15.

In total, the government wants to borrow RUB 250bn, which equals RUB 112bn on a net basis. So far in 2015, MinFin has secured RUB 93.3bn in the open market, but net issuance is negative RUB 12.9bn YTD (this excludes non-tradeable GSOs, a special instrument tailored for institutional investors, the largest holder of which is the State Pension Fund via VEB). As for the maturity breakdown, MinFin plans RUB 150bn in up to five-year tenors, RUB 80bn for tenors between 5 and 10 years and only RUB 20bn for the long end (longer than 10 years). We think the lion’s share of the bonds would be with a floating rate.

Maxim Korovin, Tatiana Zueva
VTB Capital analysts


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