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The time has probably come for the CBR to announce additional repo auction

Yesterday, the overnight FX swap closed at 6.50%, while the weighted-average rate for the whole day settled at 6.30%. Apparently, banks need some liquidity injection amid the CBR’s increased FX interventions and the smaller amount of funds coming from the budget as the tax period kicked off. As a result, banks secured RUB 40bn in the FX swap window with the CBR yesterday, while banks also borrowed RUB 19bn under the fixed-rate repo window. Therefore, we think it might be a good time for the regulator to announce an additional (i.e. ‘fine-tuning’) repo auction today in order to stem the pressure in the money market. Separately, we highlight that yesterday the Treasury conducted a three-month deposit auction for RUB 60bn: total demand was RUB 90bn and the average rate printed at 6.45%, down from 6.70% last week. Consequently, the amount of the Treasury’s deposits is to increase to RUB 320bn today, the highest volume this year. As was highlighted by Deputy Finance Minister Alexei Moiseev earlier this week, the Treasury is to conduct a three-month RUB 60bn auction on a weekly basis (every Thursday) in order to provide medium-term liquidity for the banking system. 

Therefore, it might become some sort of a medium-term rates benchmark for the market, although the amount on offer is pretty tiny, so it is unlikely to be a game changer. Meanwhile, despite somewhat elevated overnight FX swap rates, the NDF/CCS curve nudged lower with the 1M NDF closing at 6.84% (-11bp), while 12M NDF ended at 7.30%. Also, 3M MosPrime widened 3bp to 7.12% and FRAs climbed a little higher. Nevertheless, the IRS curve closed mostly unchanged, so the basis has widened a little bit (especially, on the longer tenors).
Maxim Korovin, Anton Nikitin
VTB Capital analyst

money market, CBR

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