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The Ministry of Finance is frightening with the pace
Treasury has been experimenting lately. Over the last six months, we have had a practice of issuing one floating point issue per week + one perpetual coupon issue. But the weak rollout has forced Treasury to experiment.
Last week was a floating day. Here we remembered a classic of the past: two problems with OFZ-PD (fixed coupons).
— OFZ 26242 (coupon) with a fixed income.
It recorded a record annual yield of 18.43%. During the day, there was talk not only about this record profitability, but also about the fact that the Treasury added almost 2% to the premiums in two weeks. Don't be confused by the fact that these OFZs are relatively short (about 5 years to maturity). And the record was set two weeks ago by OFZ 26245 (about 11 years to maturity).
When the same bond was issued "for sale" in May, the yield was 13.95%. Before that, the purchase of OFZ 26243 (14 years to maturity) was issued a week ago with a yield of 13.75%. We do not notice a difference of 2%, or 1%, or even 0.5%.
Those. It's not just the length, it's just the length. The point is that the Treasury has changed the rules of the game significantly and is prepared to provide much higher returns if the market demands it and the market demands it. that.
— OFZ 26248 (coupon) with a fixed income.
It was placed with a yield of 17.06%. OFZ 26245 of similar length, although not as impressive, was nevertheless placed two weeks ago with a yield of 16.65%. In two weeks it was almost 0.5%. That's a lot. Speed shouldn't scare bond investors (whose portfolios are more than half bonds), but it will certainly attract attention.
There is not much good news for the Ministry of Finance and those who like “I’ll buy OFZ 26238 when the rate reverses.”
If we look at the latest central bank report, we see:
From the report "What the trends say".
(1) Credit impulse is slowing (Figure 1) – positive
(2) The rate of inflation is slowing down and savings are increasing. This is relatively positive.
That's where the positive aspects end.
Let's move on.
(3) "Consumer demand remains strong, which currently supports high inflationary pressures" - negative
(4) However, demand and inflation remain high, requiring "maintaining a tight monetary stance for an extended period of time." - Negative.
(5) Finally: “The expected inflationary impact of significant one-off factors may require further tightening of monetary conditions to return inflation to 4% in 2025.” - Negative.
Colleagues, the phrase "impact of significant one-time factors" is an aggressive indexation of tariffs. This is what we talked about in the post. "They tried to slow down inflation, but the budget had other plans." month.
The central bank's "Measuring Inflation Expectations" report is not at all positive (Figure 2).
Inflation expectations have reached a new annual high. Observed inflation is a few steps away from its renewal. And this is like a red rag to central banks. It is mentioned at almost every press conference. I will not be surprised if rates are immediately raised to 21% on October 25.
The report says "Consumer Price Dynamics".
It is also regrettable that “monthly price growth accelerated compared to August.” (Figure 3)
Unfortunately, inflation accelerated in September. This means that it is better not to rush into buying bonds in general and OFZ in particular. This means that it will remain suspended even after it was suspended in May.
The options “Short-term (up to 1 year)”, “Gold” and “Currency” have become more viable.
#Treasury #OFZ #Bonds #Inflation
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I am a private investor, the author of the Telegram channel "Richard Happy", free courses on bonds and the auto-following strategy "Russian Market" (available in T-Investments and BCS). The written content is not an individual investment recommendation.