Yesterday, the Central Bank published an estimate of the external debt for October 1, 2017, according to which in Q3. This year, the external debt, expressed in ruble-denominated government securities, increased by $ 5.8 billion.
According to our calculations, this means that in the indicated quarter, foreign investors could increase their investments in OFZs by RUB 292 bn, which may turn out to be the highest quarterly inflow in the entire history. However, we do not exclude that the final data will eventually be adjusted downward.
In July, the inflow of funds from non-residents amounted to 27 billion rubles. – this assumes that in August and September investments increased by 265 billion rubles. In August, inflation decelerated more than expected, which, together with the recovery in oil prices, brought back the increased interest of foreign investors in ruble assets, in particular in OFZs.
According to the latest data, in October, the consumer price index continued to slow down, crossing the 3% per annum line and reaching 2.8%. This means OFZ yields of about 4.7-5% per annum in real terms, which looks very interesting relative to other emerging markets (for example, in India, real yields are about 3.7%, in Turkey – negative).
We expect the continued inflow of non-resident funds to the Russian market, for whom, in our opinion, medium-term securities will remain the most attractive, however, we note that the inflow of funds may be quite volatile due to the continuing uncertainty about the pace of tightening of the FRS monetary policy.