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First day without overnight repo auction – business as usual


Yesterday, the CBR (as had been previously announced) did not conduct an overnight auction, so the amount of outstanding repo in the system declined RUB 32bn. Meanwhile, banks secured RUB 29bn at the fixed-rate repo window, up RUB 9bn compared to Friday. At the same time, we noted that the volume of FX swaps with the CBR declined RUB 135bn to RUB 66bn as the regulator’s FX interventions moderated, while the budget also likely injected some liquidity at the beginning of the month. In light of this, the overnight FX swap rate in the market had moved down 9bp to 6.41% by the end of the day; it was interesting that the EURRUB FX swap fell 56bp to 5.90%. We highlight that today the Treasury is holding a two-week deposit auction for RUB 55bn, and that the minimum rate threshold is 6.00%, vs. 5.80% last week. Thus, the Treasury continues tightening conditions at its deposit auctions, since last year the minimum rate was 5.70% for the same facility. Further, RUB 55bn is not enough even to roll-over banks’ existing liabilities to the state.

Therefore, competition in the deposit auction is likely to be high, but it would still mark a RUB 15bn net outflow from Treasury deposits. CCS rates tightened 20‑30bp yesterday, essentially without any flow. So, the two-year CCS rate now stands at 7.49%; the five-year rate is 7.44%. NDF rates also moved down: for instance, the three-month NDF declined 40bp to 7.45%, but the NDF/CCS curve still remains inverted, especially, on six- to twelve-month horizon. FRAs have also tightened, with the 3x6 rate down 17bp to 7.69%, though spot 3M Mosprime remained unchanged at 7.22%. Hence, the IRS curve shifted down near 10-15bp along all tenors; the basis swap has widened near 10-15bp. 

Maxim Korovin, Anton Nikitin
VTB Capital analyst

money market

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