​OFZ: Russian institutional investors have reduced positions in 3Q21

RUSSIA ECONOMICS - In Brief 13 Dec 2021 by Alexander Kudrin
CBR has published data on OFZ holdings by local institutional investors following as of end of 3Q21. For the first time in a year, they reduced positions in government bonds (-R51 bln in nominal terms in June-September). Pension funds have cut investments by R48 bln, and insurance companies --- by R3 bln. Taking into account that the aggregate volume of their assets in 3Q21 increased by more than R100 bln, the share of OFZ decreased from 30.1% to 29.2% from totalThe behavior of institutional investors was not a surprise, given the rapid growth of CBR key rate of (+125 bps in 3Q21) on the back of accelerating inflation. This translated into a certain increase of OFZ yields (20-30 bps) and built strong negative expectations regarding their further dynamics. It is not surprising that institutional investors preferred to reduce their positions in government papers, preferring other assets. Moreover, the subsequent dynamics of the OFZ showed that this decision was correct.Nevertheless, this category of investors is likely to continue to play a significant role in the OFZ segment. When and if the regulator changes its rhetoric regarding the future dynamics of the interest rate, local institutional players likely to increase exposure on OFZs at a faster pace. In general, the volume of their net purchases in 2022, according to GKEM Analytica estimates, may reach R200-250 blnEvgeny GavrilenkovAlexander Kudrin

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