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Money market: NDFs continue moving higher

The USDRUB overnight FX swap was closed yesterday for Columbus Day. However, the EURRUB (albeit a less liquid instrument) overnight swap rate closed 38bp higher at 7.52%. Meanwhile, NDF rates corrected lower in the first half of the day, but closed a bit higher than on Friday. In addition, we highlight that the NDF/XCCY swap curve continued to flatten. Thus, 12M NDF widened 27bp to 9.22%, while the 2-year XCCY swap rate ended 24bp higher at 8.93%. Therefore, the 1s2s XCCY swap spread tightened to -30bp, from -14bp last week. Front end NDFs moved up 8-10bp. The IRS curve also shifted up 12-16bp, so the basis has narrowed a bit. The CBR’s two-day repo auction was well bid at RUB 237.8bn, so the whole offered RUB 220bn was allocated at an average rate of 8.08%. However, the CBR’s liquidity injection has been partially offset by a RUB 50bn withdrawal of State Pension Fund deposits. In addition, banks secured RUB 596.1bn in three-month 312-P auction at an average rate of 8.25%. However, as we have argued before, net injection under this facility would only be about RUB 50bn. 

The CBR’s ad hoc repo auction would boost the balance of banks’ correspondent accounts, helping them to comply better with the averaging regulation for the management of mandatory reserves. Nevertheless, the amount provided is barely a remedy, since the outstanding amount of correspondent accounts was just RUB 765bn yesterday, while we estimate the minimum volume needed at at least RUB 1.0bn. Overall, given that the tax period lies ahead, we think banks’ repo debt to the CBR could reach RUB 3.0tn at the end of the month, which is not an alarming level, but would be the highest since April (were it to materialise).
Maxim Korovin, Tatyana Zueva
VTB Capital analyst

money market, NDF

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