OFZ: In stand-by mode

RUSSIA ECONOMICS - Report 14 Sep 2021 by Evgeny Gavrilenkov and Alexander Kudrin

The CBR’s hawkish message is likely to put a pause on the inflow of international investors’ funds into the OFZ market. The yields in the long end of the curve remain attractive in real terms, especially in anticipation of a potential cut of the inflation target by the regulator, but the moment to play the disinflation game has not yet arrived. From the supply/demand point of view, the situation is favorable, as the Finance Ministry will remain almost flat in terms of net borrowing until the year end and, on top of that, may cut the issuance program next year. Y-o-y inflation will start coming down in October, which, accompanied by a potential change in the CBR's rhetoric, may fuel a rally in OFZs.

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