Further decline of OFZ yields in August

Source: Central Bank of the Russian Federation in English

In August 2019, yields on federal government bonds (OFZ) continued to go down on the back of the general loosening of monetary conditions in the largest world economies. These are the findings given in the new issue of the Financial Market Risk Review.
The National Settlement Depository reports that the share on non-residents’ OFZ holdings in the accounts of foreign depositories slightly decreased during August and totalled 29% of the overall OFZ market.
The worldwide trend of monetary policy loosening is accompanied by growth in the proportion of negative-yield financial instruments. Increasingly more foreign banks set negative interest rates in certain currencies for depositing clients. However, Russian banks has no such opportunity due to legislative restrictions. In this regard, banks more often opt for charging (increasing) the account management fee for raising funds in negative-yield currencies.
The stress test of the Russian OTC derivatives market in the scenarios of further interest rate decrease by national central banks and in a hard Brexit scenario has not revealed any risks of loss of market players’ financial stability. Yet, a hard Brexit scenario may entail indirect effects that can considerably impact global markets.
9 September 2019

MIL OSI