OFZ (Federal Loan Bonds)

The main articles are:

• National debt of Russia
• Bonds

What are OFZs

At the beginning of 2023, the main types of OFZ are three papers.

OFZ-PD: Fixed Income Bonds

OFZ-PD is a fixed-income bond for the entire term of circulation of a security with coupon payments once every six months. At the moment, this is the most popular type of placement, the first OFZ-PD were released in 1997.

The main drawback of such bonds is interest rate risk. The market value of fixed-income bonds decreases with rising rates in the money market and increases with lower rates. The longer the maturity, the stronger the dependence on interest rates.

It is profitable to buy OFZ-PD if it is supposed to reduce inflation and the key rate of the Central Bank. If there are expectations of a rate increase, it is unprofitable to buy OFZ-PD, and OFZ-PK and OFN-IN are more suitable for this.

OFZ-PK: Bonds with variable coupon

OFZ-PK - bonds with a variable coupon (aka "floaters"), the coupon yield on which is tied to money market indicators and depends on the RUONIA rate. The coupon rate is defined as the arithmetic average of RUONIA rates for the current coupon period with a small lag of 7 days plus a premium.

The advantage of OFZ-PK is following the money market and the higher the rate, the higher the yield. It is profitable to buy them when there are expectations of rising inflation and rates on the trajectory of tightening monetary policy. However, if financial conditions are relaxed, this type of bonds will lose in comparison with OFZ-PD.

OFZ-IN: Indexable denomination bonds

OFZ-IN is an indexable denomination bond that varies with inflation plus a small 2.5% premium. Regardless of the scale of the price increase, the value of the bond and payments will be indexed.

OFZ-INs have the lowest volatility and are the safest type of investment for individuals with a passive investment strategy. The main risks are deflation, which is practically impossible in Russia in the medium term, with the exception of local episodes of price correction.

OFZ-IN is unprofitable to buy at an inflationary peak with a reversal formation of prices, as in March-April 2022, but it is reasonable to buy them in order to hedge risks from an unfavorable inflationary situation in the future.

2022

Decrease in the share of non-residents in OFZ to 13.2%

By the end of 2022, it turned out that half of all OFZs owned, allegedly in accounts with non-residents, are the property of Russian residents.

After the outbreak of the conflict in Ukraine, the volume of OFZ, which was formally listed among non-residents, froze at 2.74 trillion and practically did not change from March to October 2022, and in October almost 600 billion OFZs were unexpectedly re-preserved and written off.

As a result, the share of non-residents in OFZ decreased from 17.6% to 13.2% as of December 1, 2022, and the maximum presence was in March 2020 (almost 35%). Taking into account the volume of emissions in December and the further process of depreservation, the share of OFZ should decrease to a negligible 10% - at least from August 2012.

This is where the era of the presence of non-residents in OFZs, one might say, ends and the Russian public debt market closes "on itself," that is, on residents where Russian banks are the main investor, wrote the Spydell Finance channel.

But still [1] , the Bank of Russia's comments are curious: "Under the conditions of sanctions measures and retaliatory restrictions on non-resident transactions on the Russian market, the owners of Russian securities accounted for in foreign accounting infrastructure received the opportunity provided by law to transfer them to the Russian accounting system. As a result of the transfer, there was a significant decrease in the share of non-residents in the OFZ market, since almost half of the securities were transferred according to the statements of Russian persons.

The total amount of securities written off is estimated at 1.36 trillion rubles. in ruble equivalent. Forced transfers of OFZs were most actively carried out - 37.7% of the total volume of OFZs stored in depot accounts opened to foreign nominal holders were transferred.

Separately, it is worth noting that almost half of the volume of securities transferred to the Russian accounting infrastructure belonged to residents, despite the fact that it was taken into account in foreign depositories. "

I wonder where else will the Russian trace emerge in foreign investment in Russia? Perhaps the presence of residents in the external debt of Russia is more significant than previously assumed.

98% of the domestic public debt of Russia in the amount of 18 trillion rubles is represented in 3 types of OFZ

The volume of Russia's domestic public debt as of December 2022 is 18 trillion rubles, of which almost 98% of the debt is represented in three types of government securities: OFZ-PD with a debt of 9.8 trillion rubles, OFZ-PK in the amount of 6.9 trillion and OFZ-IN, whose obligations amount to 1 trillion.

The yield on 10-year OFZs fell to 9.1% - below the level before the start of the special operation in Ukraine

In early June 2022, the yield on 10-year OFZs after takeoff amid Russia's special operation in Ukraine fell below the levels of early February and amounted to 9.17%.

The share of foreign investments in OFZs decreased to 18.8%

The share of foreign investments in Russian federal loan bonds (OFZs) by January 28, 2022 decreased to 18.8%. This is the minimum value since July 2015.

2020

The Ministry of Finance placed OFZs in the 3rd quarter for a record 1.237 trillion rubles

in the Ministry of Finance Russia third quarter of 2020, he auctioned federal loan bonds (OFZs) for a record 1.237 trillion, rubles exceeding the quarterly plan by 237 billion rubles.

The ministry's plan for borrowing in the OFZ market for the third quarter was 1 trillion rubles.

The rescue of the Russian federal budget, where a "hole" of 4.5 trillion rubles arose, was entrusted to the country's largest state banks at the expense of depositors' money.

At the end of September, the Ministry of Finance took an unprecedented 833 billion rubles on the market to cover the deficit of the treasury, which lost 40% of oil and gas revenues.

The month ended with three historical records for the department at once: the largest volume of OFZ sales for the month; the largest amount of funds raised for the auction day (215 billion rubles) and the largest executed application (95 billion rubles).

All auctions in September took place according to the same scenario: a narrow circle of 3-4 mysterious investors brought tens of billions of rubles for placements, putting forward "giant applications" in a narrow price range and taking away the "lion's share" of the papers proposed by the Ministry of Finance.

The largest buyer was Sberbank. In September, he increased investments in OFZs by 462 billion rubles. Thus, with money from Sberbank, the government covered 55% of the funding needs.

The share of foreign denominations in OFZ in August amounted to 28.52%

As of August 31, 2020, the share of non-residents calculated as the share of OFZs in the accounts of foreign nominal holders, according to the Information Center of the National Settlement Depository (NSD), amounted to 28.52% (current face value) and 28.26% (initial face value), showing a slight decrease compared to July. This was reported on September 7, 2020 in NSD.

In August, there were fluctuations at the level of 28.50% -28.91% when calculating the share in the current nominal value and 28.24-28.65% in the initial nominal value (reflects the change in the position of participants excluding depreciation/indexation of the nominal value). At the same time, as of August 31, 2020, the share of OFZs in the accounts of foreign nominal holders and financial institutions with 100% participation of foreign capital (according to the Bank of Russia classification) amounted to 34.47% (current face value), which turned out to be lower than the July indicators.

Significant changes in the share of non-residents occurred in the following categories:

• In OFZ-PK 24021 with maturity in April 2024, the share continued to decline, having decreased by 12.01 percentage points (pp), and at the end of the month amounted to 23.69%;
• In OFZ-PD 26219 with maturity in September 2026 - there was a decrease in the share by 2.01% to 37.18%;
• In OFZ-PD 26234 with maturity in July 2025, the share of non-residents continues to grow after the June issue, having increased by 2.58 pp in August, reaching 27.46%;
• In OFZ-PD 26228 with maturity in April 2030, the share increased by 3.09 pp to 57.03%.

The share of foreign denominations in OFZ in July amounted to 28.91%

As of July 31, 2020, the share of non-residents calculated as the share of OFZs in the accounts of foreign nominal holders according to the Information Center of the National Settlement Depository (NSD) amounted to 28.91% (current face value) and 28.65% (initial face value), showing a slight decrease compared to June. This was reported on August 4, 2020 in NSD.

In July, there were fluctuations at the level of 28.86% -29.62% when calculating the share in the current nominal value and 28.59-29.33% in the initial nominal value (reflects the change in the position of participants excluding depreciation/indexation of the nominal value).

At the same time, as of July 31, 2020, the share of OFZs in the accounts of foreign nominal holders and financial institutions with 100% participation of foreign capital (according to the Bank of Russia classification) amounted to 34.76% (current face value), which turned out to be lower than the June indicators.

In July, significant changes in the share of non-residents occurred in the following categories:

• In OFZ-PK 24021 with maturity in April 2024, the share decreased by 15.12 percentage points (pp) to 35.70%;
• OFZ-PD 26215, maturing in August 2023, reduced its share by 3.10 pp to 47.37%;
• OFZ-PD 26224 share maturing in May 2029 decreased by 2.04 pp to 51.67%;
• In OFZ-PD 26217 with maturity in August 2021, the share decreased by 1.97 pp to 14.44%;
• In OFZ-PD 26234 with maturity in July 2025, the share of non-residents continued to grow after the June issue and increased by 4.87 pp, reaching 24.88%;
• In OFZ-PD 26232 with maturity in October 2027, the share increased by 2.74 pp to 20.97%;
• In OFZ-PD 26212 with maturity in January 2028, the share increased to 69.28%.

The share of foreign denominations in OFZs in June amounted to 29.69%

As of June 30, 2020, the share of non-residents calculated as the share of OFZs in the accounts of foreign nominal holders, according to the Information Center of the National Settlement Depository (NSD), amounted to 29.62% (current face value) and 29.33% (initial face value), showing a slight decrease compared to May. This was announced on July 3, 2020 by NSD.

In June, there were fluctuations at the level of 29.62% -30.56% when calculating the share in the current nominal value and 29.33-30.25% in the initial nominal value (reflects the change in the position of participants excluding depreciation/indexation of the nominal value).

At the same time, as of June 30, 2020, the share of OFZs in the accounts of foreign nominal holders and financial organizations with 100% participation of foreign capital amounted to 35.45% (current face value), which is commensurate with the May indicators.

Significant changes in the share of non-residents occurred in the following categories:

At the end of the month, the share in OFZ-PD 24021 maturing in April 2024 significantly decreased by 10.73 percentage points (pp) compared to the beginning of the month. OFZ-PD 26228 with maturity in April 2030 - there was a reduction in the share by 5,26 pp and fixed at 53.93%, OFZ-PD 26233 with maturity in July 2035 - the share increased by 3,74 pp to 4.86%, the share in OFZ-PD 26230 maturing in March 2039 decreased by 4,42 pp to 29.85%, OFZ-PD 26225 with maturity in May 2034 - the share decreased by 4.12 pp and amounted to 39.22%. On June 3, OFZ-PD 26234 was issued and by the middle of the month the share of non-residents exceeded 10%, and by the end it was recorded at 20.01%.

In comparison with May, June is relatively stable; according to the general trend, the main changes in non-resident participation shares occurred in the middle of the month.

The Ministry of Finance sold OFZs for a record 112 billion rubles

On May 20, 2020, the Ministry of Finance of the Russian Federation sold a record volume of federal loan bonds at an auction due to expectations of easing monetary policy and long liquidity from the Bank of Russia.

The agency placed at the first of three auctions OFZ-PD 26232 with maturity in October 2027 for 112 billion rubles at a yield of 5.27% per annum, which is 1 basis point higher than the close of trading the day before.

Yields on government securities fell to historic lows amid forecasts of an aggressive key rate cut by the Bank of Russia, which will also launch repo operations for one month next week, and for a year in June. In addition, the Ministry of Finance will have to repay government bonds for 232 billion rubles on May 27.

Investor demand at the first of three auctions on May 20 amounted to 149.3 billion rubles.

Russia joins a number of countries that have rushed to take advantage of record low borrowing costs, setting a record for bond sales.

Russia has used historically low borrowing costs to fund its economic stimulus plans.

The share of foreign denominations in OFZs stabilized in April by 30.59%

In April 2020, the share of non-residents, calculated as the share of OFZs in the accounts of foreign nominal holders, at the to data Center of information the National Settlement Depository () MNR stabilized and amounted to 30.59% (current face value). This was announced on May 8, 2020 by NSD.

In April, there were fluctuations at the level of 30.6% -31.1% when calculating the share in the current nominal value and 30.25% -30.75% - in the initial nominal value (reflects the change in the positions of participants excluding depreciation/indexation of the nominal value). As of April 30, 2020, the OFZ share in the accounts of foreign nominal holders was: 30.59% (current face value), 30.26% (initial face value). For comparison: as of December 31, 2019, the share of non-residents in the current denomination was 31.50%, and in the initial denomination - 31.21%.

At the same time, as of April 30, 2020, the share of OFZs in the accounts of foreign nominal holders and financial organizations with 100% participation of foreign capital * amounted to 34.65% (current face value).

The movements were mainly associated with auctions of the Ministry of Finance for the placement of OFZs. Significant changes in the share of non-residents occurred in the following categories:

• OFZ-PD 26228 with maturity in April 2030 - a decrease in April to 64.49%, by 14.36 percentage points,
• OFZ-PD 26229 with maturity in November 2025 - a decrease in April to 53.79% by 6.05 percentage points,
• OFZ-PD 26232 with maturity in October 2027 - the share increased by 5.85 percentage points and amounted to 12, 25% as of April 30.