Yesterday, front end rates calmed down a bit, with the overnight FX swap seen at 5.54% at the end of the day, down about 100bp compared with Monday. At the same time, the weighted-average FX swap rate in yesterday’s session printed at 6.27% with the highest print at 6.48%. So, we do not rule out that some banks have tapped the FX swap window with the CBR, but the size was unlikely significant, though on Monday banks secured RUB 61bn via the FX swap. Meanwhile, the CBR has cut the limit for the one-week repo to RUB 2.18tn, while demand was RUB 2.4tn. Nevertheless, the average rate was set at 5.56%. Thus, the CBR could withdraw RUB 120bn in liquidity today, but it would be offset by 312-P money from Monday’s auction. Also, given the healthy budget expenditures at the beginning of the month, the decline in repo so far is not likely to be a problem.
Separately, the Treasury has allocated RUB 55bn on two-week bank deposits at an average rate of 6.0% (the same as last week). Total demand amounted to RUB 102bn. However, on a net basis the outstanding amount of Treasury deposits is to decline RUB 20bn today. In the rate markets, front end NDF rates nudged up near 5bp, with 1M NDF closing at 6.75%. Also, 3M MosPrime has widened 3bp to 7.07% together with 3x6 FRA (7.40%). Consequently, IRS rates moved up 3-5bp. As we have discussed recently, the IRS curve now prices in a 25-50bp rate hike by the CBR on a 3-6 month horizon, a view which we do not share. Thus, we think receiving one-year IRS at 7.57% looks interesting, although we understand that liquidity on the IRS curve could be skewed to the bid side at the moment.