Liquidity in the banking system improved substantially with the start of the month on the back of consolidated budget injections. The average level of correspondent accounts is around RUB 860bn, i.e. enough to get through the end of the RRRs regulation period without additional demand for RUB liquidity. The CBR provided RUB 255bn at a 5.59% w.a. via overnight repo. On Thursday, the average overnight FX swap moved to 6.25% and the MICEX repo was around 6.2%.
Meanwhile, the consolidated budget impact was negative RUB 200bn in July (i.e. around RUB 500bn adjusted for deposits) and FX interventions subtracted RUB 150bn from the system too. As such, if the CBR continues to sell USD 200-400mn on a daily basis, one auction is likely not enough to anchor FX swap even around 6% and the CBR would need to conduct more MTRO auctions to reduce repo utilisation in order to compensate for FX interventions.
However, we do not believe that, over time, the FX swap and auction repo will be flat because repo limits will be lower and there will be no excess liquidity to redistribute between the repo and FX swap markets (moreover, counterparty limits will act as a drag). The only impact of the MTRO auctions on FX swap is that some large banks will substitute FX swap from the CBR with 312-P instruments. Hence, we believe that the average FX swap will be around 5.80-6.0% if more MTRO auctions are conducted. Considering this scenario, the NDF curve continues to look abnormally inverted and the 3-month NDF (at 6.24%) should trade near 12-month NDF (at 6.09%). We recommend paying attention to the 3m12m NDF steepener as further 312-P auctions to cap FX swap.