Page 117 - RusRPTMay21

Growing oil prices act as a positive driver for this factor, she notes.
8.5 Fixed income
Net OFZ issuance surged from RUB 145bn in February to RUB 531bn in March. A major part of the new issue was distributed on the last day of the month, when the allocation reached RUB 355bn. That was a maximum since November 2020 (when the lion’s share of new placements were floaters). According to the CBR data and our own calculations, in March local banks purchased RUB 460bn of the primary issuance and another RUB 150bn on the secondary market, thus increasing their OFZ holdings RUB 600+bn. The major portion of the purchases (RUB 560bn, including RUB 435bn on the primary market) came from systemically important entities.
The US authorities announced on April 15 new sanctions, which will take effect on 14 June. Because of the sanctions, US financial institutions are not allowed to participate in the issuance of Russian government bonds, and otherwise do not lend money to the Russian government, says Bank of Finland Institute for Economies in Transition (BOFIT).
New US sanctions had been anticipated, and market reactions after the announcement were not very significant. The ruble weakened slightly, but was stronger at the end of the week than at the beginning of the week.
But the share of foreign investors in the Russian government bond market has already fallen. At the beginning of April, they owned 19.7% of government bonds which had fallen to 18.8% of Russian sovereign ruble debt as of April 21. The largest share of foreigners was 35% in February 2020. During March, foreign investors bought only about 10% of new bonds.
The net outflow of non-resident funds from Russia’s OFZ federal bonds and Eurobonds amounted to US $3.2bn in January–March after a $600mn inflow in the same period of 2020, the central bank said in a report on Friday. In 2020, Russia saw a $3.9bn inflow of non-resident investments in the securities.
After cancelling the ruble-denominated OFZ treasury bills auction in the penultimate auction of March due to high market volatility, the Russia’s Ministry of Finance held its biggest-ever auction of fixed-coupon instruments on March 31.
In what some called a stage managed affair designed to restore confidence, the yields fell and the ruble strengthened after the finance ministry sold RUB154.1bn ($2bn) of July 2035 bonds -- a record for the so-called classic OFZs, and the biggest since November when compared with sales of
117 RUSSIA Country Report May 2021 www.intellinews.com