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Rates: combined indebtedness at repo and FX swap renewed YTD highs

On Thursday, banks' indebtedness to the CBR in repo and FX swap operations renewed YTD highs after the tax payments. The CBR repo facility remains at RUB 2.58tn and the overnight FX swap at RUB 144bn. As such, the overnight interbank market is trading around the CBR offer at 6.5% in swaps. We believe that this situation, after the previous MTRO auction (to recap, the MTRO auction was RUB 306bn and overnight rates dropped to 6.0% after this auction) is justified by: i) the consolidated budget had absorbed some RUB 285bn in Aug-Sep; and ii) the CBR has sterilised RUB 575bn via FX interventions since April and almost RUB 300bn in Aug-Sep. As such, the liability in repo and FX swap would have increased by around RUB 300bn on a net basis. We believe that the MTRO auction in October (the offering volume is RUB 500bn) is likely to help bring the repo facility back to RUB 2.0tn, giving overnight rates some relief until November at least. We expect that most Federal Treasury deposits that mature in October and November will be rolled over to December (around RUB 550-600bn in total), and that it is therefore likely that there will be full-scale tightening in the overnight markets in December. However, if the CBR continues to sell FX in the open market at the current pace (i.e. USD 200mn per day) it is likely that the MTRO auction in October will not help to keep FX swap from the CBR untouched until December. We also believe that the CBR might launch one more unplanned MTRO auction (probably 12-month in November-December) and tailor the FX intervention mechanism again as it did in September.
Anton Nikitin, Maxim Korovin
VTB Capital analyst


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