Fears of a second wave of the pandemic are forcing foreign investors to reduce investments in emerging market assets, including Russian government bonds. Over the past three weeks non-residents reduced investments in OFZ 60 billion. However, due to high domestic demand, the Ministry of Finance continues to successfully take on the market at the best conditions.International investors are actively reducing investments in the Russian market of sovereign debt. According to estimates chief analyst debt markets Bq Region Alexander Ermak, based on data of the National settlement Depository, last week non-residents reduced investments in OFZ by almost 20 billion rubles., to 2.92 trillion Steady outflow is observed the third week in a row, which was derived almost 60 billion rubles. Longer and more intense non-residents to withdraw money in March when their investments declined by 278 billion rubles In April and may, the market is dominated by the purchase of a total of 156 billion rubles, the withdrawal of foreign investors from the Russian sovereign bonds occurs on the background of a General deterioration of global market conditions. Anxiety in the markets causes an increase in the number of patients with the virus to 130-140 thousand new cases every day. “Investors started to assess the risk of re-wave of the pandemic in developed countries, the rate of recovery of the world economy, which triggered a wave of profit-taking in risk assets. Russian OFZ were no exception, the main volume of sales from non-residents was observed in long into a 14-year RUB 10 billion and 19-year-old to 6 billion rubles.”— said managing banking and financial markets PSB Dmitry Gritskevich.As a result of cooling of interest of investors to the OFZ interest rates on long papers returned to values above 6% per annum. According to the chief of analytical Department of Bank “Zenith” Vladimir Evstifeeva, investors naturally took profits in securities that have greatly increased in price on expectations of lower Central Bank key interest rate by 100 basis points. This factor was one of the key supporting interest in debt securities in may. “This event investors almost completely laid in prices that caused a wave of fixing of profit. We are not talking about structural changes and the mass exit of non-residents, rather, it looks like a normal corrective movement”,— said Mr. Evstifeev.Hurt low inflation in the beginning of this year allows us to continue the reduction of the key rate, and a more decisive step, despite the fact that external factors, such as the fall in oil prices, had proinflationary charactersnote on the demand of foreign investors in OFZ market, the Finance Ministry continues quite successfully to conduct auctions at the expense of domestic investors. At auction, consisting ofvshihsya June 3, when demand is 161 billion rubles, the Ministry has attracted nearly 109 billion rubles., June 10, demand reached a maximum value over the past five months — 239 billion rubles, however, was satisfied only 22% of applications. “The interest of Russian investors, primarily from the credit institutions, as shown by recent auctions remains high, but really, with expectations of receiving relatively large awards, which had not been agreed, the Ministry of Finance”,— notes Alexander Ermak. As pointed out by Vladimir Evstifeev, from the beginning of June in the banking system maintained a structural surplus of liquidity at the level of 1.8 trillion rubles, which forms the basis for conserving the demand on the OFZ market. “The demand for government bonds is formed and influenced by defensive strategies, when banks increase portfolio denominated debt in the calculation of the deterioration of the situation on the capital market. In the event of liquidity shortage, they will have impressive collateral for collateral for repo transactions with the Central Bank”,— said Mr. Evstifeev.A deepening correction in global markets will remain a major factor in reducing portfolio OFZ bonds by non-residents, analysts say. “The change of global sentiment will lead to a rapid return of speculative capital. Local long-term investors will remain the main beneficiaries of the reduction of the key rate of the Central Bank to new lows,” notes Dmitry Gritskevich. “We expect a flexible policy of borrowing of the Ministry of Finance on the OFZ market while maintaining a high potential of liquidity of the Russian banking system and recovery of demand from non-resident investors against the background of rising real yields OFZ”, says Alexander Ermak.Vitaly Gaydayev
