Yesterday, the OFZ market enjoyed a strong bid, with foreign investors chasing long tenors and local players searching for short linkers. The longest RFLB 27 (YTM 10.54%) and RFLB 28 (YTM 10.53%) jumped 1.3pp in price and the belly was up 0.3-0.6pp, while the short end gained 0.3pp. Subsequently, the curve turned a bit more hump-shaped, as mid-term yields declined 20bp, while the other tenors shifted down 25bp, yield-wise. The long end is now trading again at 10.5%, while the curve is pricing a cut of near 200bp on Monday; that risks disappointment, in our view.
As we expected, the OFZ auctions met solid demand, so the Ministry of Finance again had no reason to provide any premium to the secondary market. MinFin allocated RFLB 23 in full at an average yield of 10.69%, but decided to place only RUB 9.9bn in RFLB 19 6.70 despite the 2.5x bid-to-cover ratio (the average yield printed 10.75%).