​OFZ market to reopen on Mar 21, CBR will be ready to purchase bonds

RUSSIA ECONOMICS - In Brief 18 Mar 2022 by Alexander Kudrin
Today CBR announced that secondary OFZ trading will reopen next Monday, March 21, after a two-week break, which was caused by the introduction of harsh anti-Russian sanctions. Since the closure of the market, the key rate has increased to a record high of 20%. To reduce potential volatility regulator decided to start buying OFZ on the secondary market. According to CBR, all the purchased amounts will be later sold on the open market, but it’s unclear when it may happen. This step focuses on the resolution of the problem of “forced sale”, which may be, for example, the result of margin calls. It’s not yet clear how the regulator will deal with the positions of international investors (technically, local brokers are prohibited from taking orders to sell Russian securities from them).We suppose that yield in the short end of the curve will be close to the level of the key rate, while in the long part it will be lower. With all other factors being equal, the market expects CBR to start cutting off the key rate in the coming months. Hence OFZ curve is likely to be inverted. When and if the government bond market stabilizes, we may expect the equity market to reopen as well.Evgeny GavrilenkovAlexander Kudrin

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