Money market: short-term rates are calm
Due to the public holiday in the US, the overnight FX swap with the US Dollar was not available to market participants yesterday. In response to that and VAT payments, the CBR lifted the limit for the overnight repo auction to RUB 250bn: total demand amounted to RUB 341.9bn, so the whole offering size was secured at an average rate of 5.63%. Meanwhile, overnight EUR swaps traded in the 5.70-6.00% area, so the situation with banking liquidity remains comfortable. Despite the start of the January tax period, we expect short-term money market rates to remain below 6.0% on average. NDF rates closed unchanged yesterday, with the 1M rate seen at 6.51% and the 3M at 6.45%. The CCS curve moved up slightly on the belly; in particular, the 2-year rate closed at 6.37% (+2bp). 3M MosPrime settled unchanged yesterday at 7.02%, but FRAs widened a bit; we note that 6x9 rates ended at 6.87% (+12bp) yet 3x6 was at 6.85% (+1bp). In light of this, the IRS curve climbed up, which also resulted in a basis widening; in particular, the 7-year basis widened 5-7bp and closed at -72bp. Separately, the Ministry of Finance announced yesterday that it was going to the repo framework with OFZ. Given the scarcity of OFZs as a meaning of collateral, we think these operation are unlikely to draw a lot of demand (unless, of course, MinFin offers a rate below the CBR’s benchmark). On top of this, banks might be reluctant to use the new tool due to some technical drawbacks (i.e. accounting software might not be ready to digest these operations, for example, and/or difference in creating the reserves).
Maxim Korovin, Anton Nikitin
VTB Capital analyst
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