Yesterday, the CBR offered RUB 200bn via the MTRO auction at the cut-off rate of 5.85%. Total demand at the auction was RUB 289bn with the rate range from 5.76% to 6.45%. Effective net injections are to reach ca. RUB 100bn because banks have repaid around RUB 100bn in 1-3-month loans in the last few days. Thus, the volume of non-marketable asset loans is to reach RUB 1.46tn today, and this is rather positive for the overnight FX swap, short-term NDF rates and 3-month MosPrime. As of the end of 3Q13, the CBR data suggests that collateral in non-marketable asset loans was utilised by 40% and, in our view, 50% of the collateral is utilised currently. As such, we do not believe that the lack of asset loan collateral is a concern for the use of this refinancing instrument, and think that the volume of allocated asset loans might potentially increase to RUB 2tn by the year-end.
Thus, 3-month MosPrime looks to be limited by 7.30% on the upside (vs. 7.05% currently) and we think that it makes sense to receive IRS rates on spikes. Yesterday, IRS rates moved up and 1-2-year IRS rates reached 7.55%. Meanwhile, XCCY rates continue to follow RUB dynamics and 2-5-year rates increased 10-13bp on average. At the same time, Rosneft announced that it is planning rouble corporate bond sales in 2014 using the proceeds for debt repayments. Thus, this activity could potentially weigh on the 2-5-year XCCY rates and the curve might return to an inverted shape if liquidity conditions remain tough.