On Wednesday, the CBR offered RUB 320bn via overnight repo but banks used only RUB 103bn at 5.55% and miscalculated their liquidity needs. Thus, in the absence of the evening repo auction, banks’ repo facility declined to RUB 1.92tn and the CBR offer in the overnight FX swap at 6.55% was reached. As of this morning, FX swap indebtedness is around RUB 131bn. As such, it turned out that the banks miscalculated their liquidity needs for another week and their liquidity planning is far from perfect. To recap, the overnight FX swap was 4.5%, i.e. the overnight deposit rate with the CBR, and it reached 6.65%, i.e. the CBR offer in overnight FX swap, over the course of a few days.
In our view, this degree of volatility in overnight rates related to imperfect liquidity planning (and the potential disposal of overnight repo) has some adverse consequences, especially for the XCCY curve. The term premium and the premium for uncertainty need to be higher in this kind of environment, we think. Thus, the curve eventually ends up being quite steep, even if the CBR resolves the liquidity issues. We do not see much impact on the RFLB market because the bulk of RFLB