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Money market: all eyes on the CBR this week


On Friday, the overnight FX swap remained unchanged near 8.10% on Friday. However, today we expect pressure on the banking liquidity to rise, given the sizeable volume of Friday’s FX interventions and MET payment to the budget. Hence, it is no surprise that the regulator decided to conduct a RUB 330bn two-day repo auction today. Meanwhile, the key event this week is the CBR’s MPC on Friday. The CBR is facing an unenviable task this week. It is terms of trade shock, rather than the short-term spike in inflation that is of greater concern, and the shape of adjustment to this shock and, consequently, the CBR’s policy mix will be increasingly dictated by financial stability considerations. For now, there is room to raise rates only modestly — by 50pb this week — and allow RUB to take the brunt of the adjustment (for detailed view of our macro economist see a separate report CBR Monetary Policy Preview — Navigating between financial stability risks published this morning). Meanwhile, on Friday front-end NDF rates widened near 20-30bp with 3M settling at 9.58% and 12M — at 9.67%. At the same time, longer-dated XCCY swap rates remained barely changed, so the 1s2s spread widened to -40bp. Simultaneously, the IRS curve tightened a bit, so the basis swap has narrowed.

Maxim Korovin, Tatyana Zueva
VTB Capital analyst

money market, CBR

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