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Money market: liquidity is stable ahead of taxes


On Friday, the weighted-average overnight FX swap printed at 9.51% (-10bp) for the whole session, yet at the end of the day it traded near 10.50%. However, banks secured nothing from the CBR, because the rate spiked late in the evening after the main MICEX session (when the regulator is present). Meanwhile, banks borrowed a moderate RUB 64bn in the overnight repo window from the CBR. Hence, the budget continued to play a positive role, liquidity-wise. However, the latter could change soon with some heavy taxes (VAT, MET) paid this week and early next. Front-end NDF rates tightened a bit, so 3M NDF closed at 12.06%. This is still higher than the fundamentally justified level, in our view, but higher FX volatility keeps rates elevated. Longer-dated XCCY swap rates inched a bit lower as well. Meanwhile, the IRS curve tightened around 15bp along all tenors, so the basis swap tightened further. In particular, one- and two-year basis swap rates now stand at -160-180bp, compared with the -300bp area just a couple of weeks ago. Overall, the liquidity of the basis could be better, but its tightening lately highlights that banks are not in a rush for US Dollar liquidity thanks to the CBR’s FX interventions in October. In light of this, we think demand at today’s FX repo auction could be subdued.

Maxim Korovin, Tatyana Zueva
VTB Capital analyst

money market

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