Money market: NDFs spike ahead of weekend; start of new averaging period
On Friday, the overnight FX swap closed at an implied rate of 7.28%, i.e. the level of the CBR’s bid. Meanwhile, the weighted-average rate for the whole session was 9.50%. However, we do not read the collapse of the overnight FX swap as a sign that the market has moved into USD deficit mode, because Friday was the last day of the October-November averaging period. Some banks probably found themselves in a situation of rouble liquidity surplus, which was the allocated in the money market. Meanwhile, the new averaging period starts today, bringing additional demand for RUB liquidity, so we expect the overnight FX swap to bounce. In addition, banks on Friday secured RUB 115bn from the CBR at the overnight repo auction — hardly a sign of liquidity relief. Finally, the basis swap spread continued narrowing on Friday, pushed up by the higher NDF rates, which is an illustration of a fairly balanced USD liquidity situation, in our view. Meanwhile, NDF rates widened 120-130bp, with the 1M NDF closing at 12.8% and the 6M NDF at 11.89%. Longer-dated XCCY swap rates widened 40-50bp, with the 12M NDF ending at 11.20%; the 2-year XCCY swap moved to 10.38%. The IRS curve shifted some 30bp upward.
Maxim Korovin, Tatyana Zueva
VTB Capital analyst
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