Secondary OFZ Market Performance
Last Monday, geopolitical tensions negatively impacted OFZ (Russian government bonds) prices. Long-term bonds lost up to 1 percentage point at the start of trading. A correction continued into Tuesday, with average yields on mid- and long-term issues rising by 20–30 basis points (bps) day-on-day. The market stabilized midweek, and cautious buying resumed Friday on low trading volumes. Over the week:
- Mid- and long-term yields increased by 25–50 bps.
- Short-term yields rose by 10–25 bps.
- The 2–10-year yield spread widened by 21 bps week-on-week, reaching -441 bps.
Trading activity declined, especially in the latter half of the week. The average daily turnover dropped to RUB 10.1 billion from RUB 13.3 billion the previous week, with higher activity in long-term bonds.
Primary Market: Auction Overview
On November 27, the Ministry of Finance offered OFZ-PD series 26245 bonds, issuing RUB 5.24 billion at face value, representing 1.1% of the available residual volume and 16% of total demand. Key parameters included:
- Coupon Rate: 12.00% annually, semi-annual payments.
- Maturity Date: September 26, 2035.
- Cut-off Price: 76.90% of face value, with a weighted average price of 76.91%.
- Yield-to-Maturity (YTM): 17.36% (aligned with secondary market estimates).
The total demand was RUB 32.7 billion, 7.1% of the remaining issuance volume of RUB 458.9 billion. This auction followed an October 23 failure, when no bids met acceptable price levels.
On the secondary market, OFZ-PD 26245 bonds closed with a YTM of 17.07%, slightly lower than the auction result, highlighting thin trading volumes (RUB 41 billion in circulation) as a factor in price inefficiency.
Secondary Market Performance
Geopolitical tensions and rising inflation (0.37% weekly and 8.59% YoY) negatively impacted OFZ prices, particularly long-term bonds. Key trends included:
- Average Yield Movements:
- Short-term bonds (up to 2.2 years): +31–106 bps (average +65 bps).
- Mid- and long-term bonds: Changes ranged from -9 to +36 bps (average +14 bps).
- Price Performance:
- OFZ-PD prices fell 0.07% on average.
- Inflation-linked OFZ-IN bonds gained 0.20%, improving from a 0.13% increase the previous week.
Trading Activity: Turnover decreased by 19.5% to RUB 48.2 billion (down from RUB 59.9 billion the previous week), with 11.2% of transactions conducted via repos. Long-term bonds dominated activity:
- OFZ-PD 26247: 27% of total turnover.
- Other actively traded issues: OFZ-PD 26246 (11.7%), 26248 (6.5%), and 26243 (6%).
Auction Dynamics: OFZ-PD 26247
The Ministry of Finance also conducted an auction for the 15-year OFZ-PD 26247:
- Demand: 3.6 times higher than the previous auction eight weeks ago.
- Acceptance Rate: 84% of bids were rejected, compared to an 18% rejection rate at the prior auction.
- Placement Volume: 30% lower than the previous result, marking the lowest since the series began.
- Yield: Weighted average YTM of 17.36%, 71 bps higher than the prior auction and consistent with secondary market fair value estimates.
Most of the RUB 5 billion placement was absorbed by a single participant, comprising 95.4% of the volume. Smaller transactions accounted for 4.6%, highlighting concentrated demand.d issuance plan surpassed the halfway mark, with RUB 1.98 trillion issued to date.
Corporate and Sectoral Updates
- Tax Changes for Transneft:
The State Duma Budget Committee approved a second reading of amendments to increase Transneft’s profit tax rate to 40% for 2025–2030. For other companies, the tax rate will rise from 20% to 25% starting in 2025. - Dividend Announcements:
- Tatneft: Proposed an interim dividend of RUB 17.39 per share (3.2% yield), equivalent to 75% of Q3 RAS net profit.
- MDMedical: Recommended a RUB 20 dividend per share (2.2% yield) for 9M 2024. Record date: November 29, 2024.
- Astra Group: Announced a dividend of RUB 2.64 per share (0.5% yield) for 9M 2024. Record date: January 16, 2025.
- MTS Results (Q3 2024):
Revenue grew 15% year-on-year (YoY) to RUB 180.4 billion. OIBDA increased by 4% YoY to RUB 61.5 billion but was 6% below consensus due to higher ecosystem investments, staffing, and one-off expenses. Net debt rose to RUB 582.5 billion, with a net debt-to-OIBDA ratio of 2.4x. - Renaissance Insurance (9M 2024):
Gross premiums surged by 39% YoY to RUB 118 billion, driven by life insurance (+135%), health insurance (+35%), and auto insurance (+20%). Net profit fell 53% YoY to RUB 4.5 billion due to a negative revaluation of the investment portfolio.
