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Money market: was repo limit hit?

Yesterday, money market rates remained elevated. In particular, the cost of the overnight FX swap went over 6.50% and hovered near the 6.55-6.60% level for most of the day, then slipped to 6.45% at the end. Meanwhile, the overnight repo rate in MOEX moved up 5bp to 6.22%. The reason behind the stress in the money market is quite clear: yesterday was the MET payment day. However, interestingly the CBR increased the offering limit at the overnight repo auction to RUB 460bn, but banks managed to take only RUB 279bn at an average rate of 5.57%. Therefore, the total volume of outstanding repo increased RUB 70bn to RUB 2,500bn yesterday, which looks like the limit for the banking system now. The previous top was marked at RUB 2,573bn at the end of September. Consequently, banks secured a substantial amount in the FX swap window with the CBR (RUB 167bn). We note that there is one more tax payment before the end of the month, corporate profit tax on 28 November. The NDF rate remained elevated as well; in particular, 3M NDF settled at 6.49% yesterday. We are still happy to hold a receiving position in the 3M NDF opened last week at 6.45%, as overnight rates are likely to decline at the beginning of December. Meanwhile, CCS rates moved up 3bp in a largely parallel shift yesterday. IRS rates have also inched higher, but the basis tightened slightly. In particular, the 5-year basis narrowed 4bp to -58bp, while the 2-year basis closed at -51bp. In the meantime, 3M MosPrime inched up 1bp to 6.89%, while mid-term FRAs climbed up 3-4bp, with 3x6 FRA closing at 6.78%.
Maxim Korovin, Anton Nikitin
VTB Capital analysts

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