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Money market: overnight FX swap-RUONIA spread is flat

Yesterday, the weighted-average overnight FX swap rate printed at 8.22%, while it closed at 7.95%. Meanwhile, RUONIA traded at 8.15% recently, so the cost of US dollars has visibly declined in the interbank market thanks to the decent amount of CBR interventions in October. Meanwhile, despite higher money market rates, NDF implied rates tightened 20-30bp with 3M NDF closing at 8.94%, while 12M NDF declined to 9.10%. Longer dated XCCY swap rates also nudged lower, with the 2-year rate closing at 8.76%. Thus, the 1s2s XCCY swap spread moved to -35bp amid continued curve flattening. Overall, if the overnight FX swap stays near the key rate, as we have argued previously, we see the fair level for the 12M NDF at 9.0%. Meanwhile, for the second day in a row, the IRS curve outperformed the XCCY swap curve as the former moved down 40-50bp yesterday. Therefore, the basis swap spread has narrowed another 10-15bp along the whole curve.
Maxim Korovin, Tatyana Zueva
VTB Capital analyst

money market

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