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Money market: low rates to persist until the end of the week

Yesterday, the overnight FX swap rate moved down to 5.70% and banks once again tapped the CBR’s bid. The weighted-average overnight FX swap rates for the whole session printed at 6.40% (+10bp). NDF rates tightened 3-4bp on the low overnight, with 3M NDF closing at 7.41%. At the same time, longer dated XCCY swap rates picked up 10-15bp, with the 2-year XCCY swap closing at 8.10%. Hence, the 1s2s XCCY swap spread remained barely changed, but the 3m12m NDF spread picked up to 75-80bp, from 45-65bp last week. Meanwhile, we highlight two items of news: Gazprom Neft signed a RUB 35bn loan, while Gazprom announced a RUB 60bn domestic bond programme. Historically, exporters tended to swap RUB proceeds into USD, which would put some downward pressure on the XCCY swap curve. Alternatively, with all other things being equal, the exchange market might see some undersupply of hard currency. Separately, we highlight that the CBR has provided RUB 1.99tn at the one-week repo auction at 8.17%. Almost all bids were satisfied. At the same time, banks borrowed only RUB 15bn from the Treasury in two-week deposit auction. Therefore, today’s outflow of Treasury deposits would equal RUB 240bn, which would be only partially offset by the RUB 160bn increase in the CBR’s repo. Meanwhile, we do not expect any substantial volatility in the money market since, as we have argued before, the amount of free reserves is sufficient in the banking system. However, the start of the new averaging period next week could squeeze the interbank lending market. Hence, we believe the probability of seeing an additional repo auction is quite high or banks might increase the debt under the 312-P facility.
Maxim Korovin, Tatyana Zueva
VTB Capital analyst

money market

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