The CBR has held the first
Yesterday’s auction was not as successful as we had initially expected, with demand coming below the auction size. As a result, we expect the repo debt to decline to below RUB 1.9tn within the coming weeks (also taking into account the end of the tax season), which would high, but still less than the currently used repo (RUB 2,355bn) and FX swap refinancing (RUB 108bn) taken together. As result, we could see lower money market rates, but on average they are likely to remain elevated compared with the central policy rate.
The CBR was probably disappointed with the results of the auction and will likely consider that this is not enough to achieve its targets on the path to policy easing and improving the monetary policy transmission mechanism. Thus, as a next step from regulator we see a higher chance of there being an outright base rate cut and lower premium at the next MTRO auction (likely at 0bp vs. 25bp this time). Both measures might be announced as soon as at the 9 August policy meeting.