This week on May 22 FinMin called off an auction of RUB 34bn (USD 1.1bn) worth of 26210 series OFZ 7-year federal bonds. According to FinMin’s announcement, the auction was called off due to the absence of competitive bids in the proposed yield range (6.33%-6.38%). RUB 20bn worth of the same type of bonds were auctioned on April 24 at 6.33%. This made the first auction called off since October 2012.
Bloomberg reported that yields on the bonds jumped 10bps to 6.47% in two days prior to the auction, attributing increased rates to failed expectations of the central bank to cut the rates this month. To remind, the Central Bank of Russia maintained main interest rates unchanged in May due to inflation accelerating to 7.2% y/y in April.
Previously, in May and April the primary and secondary OFZ market notably revived, with yields going down and amounts proposed and auctioned increasing. This was generally attributed to the inflation in March beating expectation of 7.2%-7.3% at 7%, the Central Bank of Russia taking a softer stance on monetary stimulus and interest rate cut expected by the end of summer, as well as more certainty regarding the stability of the central bank after its new head Elvira Nabiullina will take over the office in June.
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