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Banks borrow RUB 150bn via fixed-term repo and overnight FX swap, swap rates might move higher on the back of weaker RUB

On Friday, overnight rates remained high at around 6.5% in the swap market; interbank deposit rates above 6.25% for most of the day. The main factor was the payment of corporate income tax (up to RUB 100bn, by our estimates) and tight liquidity conditions in the absence of 'fine-tuning' operations. As a result, banks borrowed RUB 88bn via the fixed-term repo facility and RUB 62bn via the overnight FX swap facility (in addition to indebtedness of RUB 2.26tn via the one-week repo). Furthermore, the average balance on the correspondent accounts since 10 February was RUB 1.034tn, and this implies that there was no excess liquidity during this period. Demand for average balances until 10 March is therefore likely to remain solid. Meanwhile, NDF/XCCY rates moved down 3-5bp in 6-12-month rates and 8-10bp in 2-5-year tenors. 2-year XCCY rate closed at 7.10%. IRS rates also dropped by 10bp and 2-year closed at 7.6%. Overall, we consider that the rates will move higher on the back of another hit to the RUB and that XCCY rates will outperform IRS rates on the upside and the basis spread might narrow.
Maxim Korovin, Anton Nikitin
VTB Capital analyst


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