Yesterday, the CBR offered RUB 210bn in overnight direct repo auction against demand of URB 236.9bn. The average rate printed at 5.60% and the whole limit was utilised, but the amount of outstanding repo still declined RUB 44bn. Money market rates remained elevated. In particular, the cost of FX swap was 6.33% yesterday, while the overnight repo rate in MOEX closed at 6.14%. In light of this, we think that banks once again tapped the FX swap window with the CBR, whilst on 11 September they secured RUB 12.5bn of liquidity under that facility. Even though the tax period only kicks off next week, banks are boosting the average balance of current accounts in the CBR to comply with the averaging regulation for required reserves management. Cross-currency rates nudged down marginally yesterday in response to the downwards move in UST yields. IRS remained flat, so the basis swap curve tightened 1bp.
3M MosPrime moved down 1bp yesterday to 6.79%, but 6x9 and 9x12 FRAs moved up 9bp and 13bp, respectively, to 6.47% and 6.43%. Also, 3x6 FRA now stands at 6.47%, so the forward curve prices only one 25-35bp downward move in medium-term rates on a 3-9 month horizon. At the same time, the IRS forward curve still prices a 6x9 rate near 6.23%, i.e. about a 50bp rate cut. Hence, we think 1Y IRS needs to be about 7bp higher, based on the FRA curve near 6.70%.