Return to the Moscow Exchange: how the first public debt trades went after a record break

What’s happened

On Monday, March 21, trading on the stock market resumed on the Moscow Stock Exchange, which had not been held since February 28. The Central Bank has decided to break a record three-week break by trading in Russian ruble debt. From 10:00 to 11:00 Moscow time, an auction was held for all 55 OFZ issues (the exchange collected applications for the purchase and sale of securities, and based on the results of the book of applications determined the price of transactions). From 13:00 to 17:00 the auction was held as usual. The volume of trades for the day amounted to 13.8 billion rubles, of which 2.6 billion rubles fell on the opening auction.

Trading in the stock market was interrupted due to increased volatility, which began in the securities of Russian issuers after the start of the “military operation” * of Russia in Ukraine. On Friday, March 18, the Central Bank announced that in order to “ensure balanced liquidity in the securities market and prevent excessive volatility,” it will buy OFZ “to the extent necessary to limit risks to financial stability.”

How the auction began

At the beginning of trading, market participants expected a decrease in quotations, but it was not as dramatic as it seemed before the opening of the exchange, says investment strategist of “Arikapital” Sergei Suverov. According to him, this was due to the participation in the Central Bank’s bidding, as well as the fact that foreign investors do not have the opportunity to sell debt securities.

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At the opening auction, the RGBI government bond index fell 9.44% to 98.21 points. This is close to the minimum values ​​of December 2014, according to the BCS Express review. In general, the auction was rather sluggish, according to the portfolio manager of Alfa-Capital Eugene Zhornist. “In the short issues there were those who wanted to sell securities with a yield of up to 30%, in the long ones – about 14-15%. Towards the end of the auction, without exaggeration, huge purchase orders appeared, presumably from the Central Bank. Applications were submitted at logical, in our opinion, levels – just below 20% of the yield in short and about 17% in long issues, “- says Jornist.

Yield on short-term securities at the opening auction was formed at 19-20% per annum, it is close to the key rate and is determined by the cost of short-term ruble resources, says managing director, chief strategist of “Aton” Alexander Kudrin. At the same time, the yield on long-term bonds was set at 14-16%. “This indicates that investors expect inflation to slow in the longer term,” said Kudrin.

At the main trading session, OFZ quotes went up. Yields on short-term bonds fell to 17% and long-term bonds to 14% per annum. “It is possible that the curve may not change much in the coming days, and in the long run I would expect lower yields, which makes OFZ an attractive object of investment,” said Zhornist of Alfa Capital.

Price dynamics and yield dynamics turned out to be different depending on the bond segment, says Pavel Mitrofanov, portfolio manager of Sistema Capital. Thus, floating coupon bonds rose by 4% due to rising key rates and high inflation expectations. At the same time, the prices of classic issues decreased, and profitability increased by 2-4% depending on the maturity. “We can say that the reduction in OFZ prices from 1% to 10% along the curve was not so significant with the unprecedented sanctions imposed on Russia. Probably, the market is already taking into account the weighted, not rigid, tone of the Central Bank, which allows for easing of monetary policy after the spike in commodity prices as the boom in demand cools, ”Mitrofanov explains.

In general, the price levels on the first day reflect the vision of local market participants, especially banks, says Alexander Kudrin from Aton. “Most of them believe that the regulator will soon start lowering the key rate, as its current level is prohibitive for the economy. In addition, many banks have attracted significant amounts of ruble deposits in recent weeks and are clearly in need of profitable instruments. Apparently, the regulator’s participation in the bidding was small, which allows us to consider the current levels as quite market, “he said.

To the investor

The bond market in the current conditions is very sensitive to geopolitical events and the possibility of imposing new sanctions against Russia due to the “special operation” in Ukraine. As there are now many unpredictable factors for the Russian economy, analysts interviewed by Forbes advise private investors to be careful. And look mainly at short bond issues.

“We would advise a mass investor to be in fairly short securities now, with a maturity of up to one or two years. Long-term securities can be used by investors who are well aware of the effect of paper length on its value when rates change. The purchase of long securities is associated with the risk of further growth in rates. The situation in the economy is very uncertain, no one can yet imagine the further development of events and will not make a confident bet that inflation will be reduced in the coming years without new increases, “- said Investment Director” BCS World of Investment “Mikhail Kuzin.

Vladimir Malinovsky, head of Otkrytie Investitsii’s debt market analysis department, notes that the impact of sanctions and future restrictions on the economy may be stronger than it seems now. Therefore, bonds with a maturity of up to one and a half years can be considered optimal for investment. “At the same time, against the background of the presence of the Central Bank in the market, yield rates in the near future will fluctuate within 15-20%.”

VTB My Investments, in turn, advises to look closely at government bonds with a variable coupon and indexable face value, as such issues can serve as protection against inflation and rising interest rates. As follows from the analytical materials of the company, experts consider interesting for investment issues OFZ 52001, OFZ 52002, OFZ 52003, OFZ 24020, OFZ 24021, OFZ 29014.

* According to the request of Roskomnadzor, when preparing materials on a special operation in eastern Ukraine, all Russian media are obliged to use information only from official sources of the Russian Federation. We cannot publish materials in which the operation is called “attack”, “invasion” or “declaration of war”, if it is not a direct quote (Article 53 of the Federal Law on the Media). In case of violation of the requirement from the media, a fine of 5 million rubles may be imposed, and the publication may be blocked.

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