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Money market: liquidity is getting tougher

The liquidity injection from the budget continued to decline yesterday, as the tax period moves on. Therefore, demand for CBR refinancing increased, with banks borrowing RUB 156bn in the overnight repo window on Wednesday. In light of this, the weighted-average overnight FX swap rate widened 23bp to 9.74%, although it ultimately closed at 9.35%. Given the rising tax pressure, we think the situation in the money market is going to become increasingly tense through the end of November, Still, we suppose the CBR’s limit on FX swap operations is enough to cover the marginal liquidity needs of banks. Overall, we expect the consolidated budget to sterilise near RUB 150bn, on a cash basis, for the whole of November. Front-end NDF rates continued moving lower yesterday amid a stable overnight FX swap rate. Hence, 1M NDF closed at 11.02% (-12bp), while 3M ended 22bp lower at 11.29%. Longer dated XCCY swap rates ended near 8bp lower, so the curve has steepened marginally. Simultaneously, the basis swap became 4-7bp more negative yesterday.
Maxim Korovin, Tatiana Zueva
VTB Capital analysts

liquidity, CBR

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