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Money market: CBR subtracts liquidity; record rate at Treasury auction

Yesterday, the CBR provided RUB 2.15tn at the one-week repo auction against RUB 2.56tn of demand. The average rate printed at 8.12%, up from 8.09% at the previous seven auctions. Hence, the volume of outstanding repo is to decline RUB 100bn today. Meanwhile, the State Pension Fund withdrew RUB 111bn from banks on Monday, which perhaps underpinned the demand at yesterday’s Treasury’s deposit auction. Hence, the Treasury has offered RUB 50bn for three months at a minimum rate of 8.80%. However, demand came at RUB 145.8bn and the weighted-average rate was set at 10.53%. To recap, back in August banks borrowed three-month funds from the Treasury at 10%. Nevertheless, despite tougher liquidity conditions overnight FX swap remained below 7.0%; the weighted-average rate for the whole session printed at 6.47% (-17bp), while it closed at 6.94%. In light of this, the NDF rate declined 45-50bp, with 3M closing at 7.47%, while 12M was down to 8.08%. Longer dated XCCY swap rates have also tightened, but just to 30-35bp. In particular, two-year XCCY ended at 7.86%. Therefore, as we thought, the NDF/XCCY curve has steepened with the 1s2s spread now standing at -25bp. On the IRS curve, the oneyear rate closed about 11bp lower at 10.55%, while the rest of the curve remained unchanged. 3M MosPrime ended unchanged at 10.20%. Therefore, the basis has widened about 40bp and the one-year rate now stands at -300bp. The IRS curve looks to be losing the last vestiges of liquidity now in the absence of the offer (which was mostly provided by international names), while the bid from corporates persists. The main focus today is to be on the overnight FX swap market in light of the CBR’s debut on the bid side. The intrigue is how the market reacts to the relatively low level of the CBR’s rate (5.50-5.60% implied). On the one hand, the appearance of a new liquidity provider and the fact that the regulator has acknowledged the problems with the US Dollar liquidity could fuel some profit-taking in NDFs. On the other hand, market participants might decide to test the CBR first at 5.50% level.
Maxim Korovin, Anton Nikitin
VTB Capital analyst

CBR, rouble, liquidity

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