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Local sovereign debt: one more nice shot


Yesterday, OFZ bonds kicked off on a softer footing, slipping 0.1-0.2pp across the curve. By midday, the market touched the bottom, with the belly trading 0.4-0.5pp in the red and the long end down 0.6pp. However, strong RUB dynamics spurred risk appetite for local sovereign bonds, drawing them into the black at the close. As a result, long dated bonds rose 0.1-0.2pp in price and short tenors advanced 0.15pp. The belly closed flat on average, though RFLB 19 6.70 (YTM 11.50%) inched up 0.25pp, disregarding new supply on the primary market.

The Ministry of Finance held two auctions yesterday, placing both issues for a total amount of RUB 25bn in full. The auctions met decent demand again, with the bid twice exceeding the offer. RUONIA-linked RFLB 17 is becoming more popular, and yesterday MinFin increased the average price to 96.98, from 95.56 set at the last auction. Bullet RFLB 19 6.70 was placed at an 11.72% average yield (a small premium to the secondary market). Overall, MinFin is moving fast through the 2Q15 borrowing plan, despite the ambitious target of RUB 250bn. Total issuance in April already amounts to RUB 90bn.

Maxim Korovin, Tatiana Zueva
VTB Capital analysts


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