This week on May 29 FinMin is going to propose RUB 20bn (USD 0.65bn) worth of 5-year OFZ bonds from 25081 series. Last time the bonds from 25081 series were sold on May 14 at 6.2% (guidance of 6.18%-6.23%) and on April 17 at 6.24%, and on April 3 at 6.33%.

Last week, 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 CBR 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 CBR 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.