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Money market: overnight FX swap is above 30D MA


Demand for liquidity picked up yesterday due to the VAT payment. Subsequently, the overnight repo rate widened 15-20bp to 8.65-8.70%. Hence, we think that today the CBR will be willing to increase the limit for the one-week repo auction in order to ensure the smooth passage of the MET and corporate profit taxes, due soon. Meanwhile, the Treasury has allocated RUB 170bn for three-month deposits at 10%. It was a bit of a strange auction, as the volume of bids equalled exactly RUB 170bn and there were two bids both at the minimum rate of 10%. Nevertheless, today these funds are to reach the banking system, so we do not rule out that the CBR is going to adjust the limit on repo in turns. On the other hand, the small number of bidders at the Treasury’s auction does not guarantee that funds will be distributed effectively in the interbank market. Meanwhile, we also highlight that the overnight FX swap rate closed at 7.67% yesterday, while the weighted-average rate for the whole session printed at 7.29% (+27bp). Hence, the latter has overtopped the 30D MA overnight FX swap, which is now running at 7.08%. Does it suggest that the USD deficit is fading away? To some extent, yes. Hence, according to the CBR data on foreign debt, in September there was a spike in redemptions. The absolute numbers are noisy and carry little sense, but the fact that payments on foreign debt exceeded by 2.5 times the August figures highlights that some additional demand for USD funds might have taken place. Meanwhile, in October and November foreign redemptions decline markedly, while in December there is another spike mainly due to Rosneft’s loan maturity. On the other hand, the pressure could also have driven the overnight FX swap higher on the rouble rates with the cost of the USD leg remaining unchanged. Nevertheless, NDF rates gradually widened yesterday with 3M closing at 8.01% (+9bp) and 12M ending at 8.46% (+3bp). Longer dated XCCY swap rates inched up higher as well. Meanwhile, 3M MosPrime closed at 10.34% (+5bp), while mid-term IRS rates tightened 10-15bp. Thus, the basis swap has also narrowed.

Maxim Korovin, Tatiana Zueva
VTB Capital analyst

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