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Money market: front end rates remained elevated amid taxes and ongoing FX interventions

Yesterday, overnight FX swap closed at 6.55%, while the weighted-average rate for the whole session printed at 6.35%. Thus, we think banks have once again actively tapped the FX swap window with the CBR. Meanwhile, the regulator conducted a one-week repo auction for RUB 2.22tn yesterday. Total demand came at RUB 2.54tn and the average rate was set at 5.57%. Thus, we think that today the CBR might announce an additional ‘fine-tuning’ repo auction. Banks have already been persistently relying on a fixed-rate overnight repo. On the other hand, the State Pension Fund and VEB are prepared to inject near RUB 135bn into the banking system on 27 February. To recap, VEB is conducting a one-year RUB 100bn deposit auction, while the State Pension Fund offers RUB 35bn for one month. Meanwhile, we estimate that the corporate sector could have paid up to RUB 330bn yesterday in taxes. Apparently, the CBR’s estimate of the fiscal negative impact on liquidity this week was more upbeat. Despite elevated levels of overnight FX swap, NDF barely changed yesterday with the one-month implied yield closing at 6.71% and the 12-month at 7.13%. Longer-dated rates also remained unchanged. Meanwhile, the IRS curve climbed 5bp in price amid a 1bp uptick of 3M MosPrime (7.13%). Hence, the one-year IRS closed at 7.60%. Also, FRAs saw some bids as the 6x9 rate moved up to 7.50% (+8bp).
Maxim Korovin, Anton Nikitin
VTB Capital analyst

money market

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