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Money market: overnight is down on budget’s funds


Yesterday, the situation in the overnight FX swap eased visibly and the rate moved down away from the CBR’s offer. The weighted-average rate for the whole day printed at 9.61%, while at the end of the session it closed at 10.17%. Hence, the CBR’s offer was not touched at all: as we have suggested before, banks can end the November without the need to use the FX repo window with the CBR. Liquidity is coming from the budget thanks to the constant execution of the Treasury’s deposit auctions. However, so far the government has not offered to roll over these funds into 2015 (all of the outstanding deposits mature before the year end). This situation could have an adverse impact on the liquidity balance in the system, especially in December, because the Treasury would have to withdraw deposits in order to cover the budget’s outlays due. As a result, demand for the Treasury’s money is declining, because banks do not want to take the increasing refinancing risk. Hence, yesterday the Treasury offered RUB 60bn for two weeks, but total demand was only RUB 35bn. The average rate at the auction printed at 9.94%, just 4bp above the minimum threshold. Subsequently, the total amount of the Treasury’s deposits in the system is to decline RUB 45bn today. Next week, the Treasury is offering RUB 173bn in three deposit auctions which, even if taken in full, would still result in a RUB 73bn net outflow of deposits. Front-end NDFs tightened 30bp yesterday with the 3M rate closing at 12.1%. We still think this is an interesting level to receive rates, but RUB’s high volatility could keep it elevated. The IRS curve tightened 5bp more, so the basis swap continued narrowing.

Maxim Korovin, Tatyana Zueva
VTB Capital analyst

money market

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