XCCY and IRS rates dropped as RUB appreciated
On Friday, the rates markets remained calm after the VAT payment and overnight rates hovered around 6.0-6.25%. Repo indebtedness remains at RUB 2.3tn in the auction-based repo and about RUB 25bn in the fixed-term facility. In the rates' markets, RUB dynamics have been the key factor for NDF/XCCY rates' valuations in recent weeks. Thus, as RUB appreciated to 41.50 vs. BASKET, XCCY rates dropped 6-7bp and the 1-year rate closed at 7.22% on Friday. The 6-month NDF rate closed at 7.20%. Similar dynamics were seen in IRS rates, which dropped 15bp in the last session, so, the 1-year rate is traded at 7.59%, still, with a large 45bp premium to 3-month MosPrime. The IRS/XCCY basis spread is trading close to -50-55bp in 3-year tenor and it seems that if RUB stabilises further, the spread might move wider because XCCY rates usually react more significantly to RUB appreciation than IRS rates.
Maxim Korovin, Anton Nikitin
VTB Capital analyst
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