Yesterday, the CBR offered RUB 3.44tn for one-week repo and banks secured RUB 3.16tn, which would be a net liquidity injection of RUB 74bn today. The average interest rate printed at 7.04%. Overall, yesterday’s auction marked a RUB 363.7bn increase in outstanding one-week repo, whilst the amount of auction-based repo debt hit a fresh all-time high. At current repo debt levels, conventional collateral seems to be largely exhausted. Hence, according to CBR data, as of 1 February banks pledged near 60% of available bonds. Since then the outstanding repo debt has increased 15% and there were almost no new deals in the local debt market. Therefore, the collateral usage ratio has likely increased to 70% at least. In fact, it has likely risen more than that because the CBR’s 150bp rate hike in early March produced a negative mark-to-market of near 3.0-4.0pp on the long end, 2.0pp on the belly and around 1.0pp on the front end. In a nutshell, current levels of collateral usage are at a record high. Therefore, it comes as no surprise that despite record demand for repo, banks have also secured RUB 125bn via FX swap from the CBR (and that was on a day with no tax payment). However, we estimate the remaining tax payments before the end of the month would amount to near RUB 600bn combined, which would send the consolidated budget into a surplus. In addition, households’ demand for cash is also set to increase ahead of the May public holidays. Thus, we stick with our view that banks will end April with around RUB 480-500bn debt under the FX swap facility.
Rouble rates were well bid yesterday, even though FX was stable. At the end of the day, front end NDF rates surged 15-20bp with the 3M rate closing at 9.05% and 1M at 8.80%. The longer-dated CCS rate also climbed up, so the curve remained inverted with 1s5s standing at -90bp. The IRS curve also re-priced higher by near 10bp, so the basis narrowed 9bp in the front end. We think receiving NDF rates at current levels looks attractive. We also think the current 1s5s CCS curve inversion looks excessive, and therefore paying longer rates looks appropriate (there are no signs of wrong-way flow).