Yesterday, the Ministry of Finance said that the Treasury was going to withdraw all deposits by the end of the year, except RUB 60bn maturing early next year. In our view, the announcement will not catch anyone by surprise, since the Ministry does not have other reserves to fulfil budget’s outlays, given that net borrowings are negative YTD. Now, the Treasury has RUB 1.1tn on banks’ deposits: RUB 220bn are due on Friday this week, but the biggest issue is next week, when RUB 602bn matures. We think that the Treasury might actually announce a one-week deposit auction next week to smooth the maturity schedule. Nevertheless, the greatest risk is now the time gap between the moment of deposit withdrawal and actual disbursement of the budget spending. This potential gap would have to be covered by the CBR’s sources. In an extreme situation, banks would require RUB 872bn of additional liquidity from the regulator. We estimate that securities collateral utilisation is now running at 63-65%. Implying the maximum utilisation rate at 75%, under the repo facilities banks might secure an additional RUB 450-500bn from CBR by the year end. The potential of 312-P is unknown, but we conservatively assume that it is running at a maximum now. Therefore, it is clear that banks would need the CBR’s FX swap window (we estimate that RUB 250-300bn might be required at some point in December). Meanwhile, the CBR set a fairly tight limit for the next 312-P auction, scheduled for 8 December, of RUB 500bn. According to the CBR’s data, near RUB 634bn of 312-P debt matures in the next 30 days, while at the 3-month auction in September banks borrowed RUB 506bn.
Overnight FX swap rates remained rather low yesterday: the weighted-average rate for the whole session printed at 8.90% (-40bp on the day). Hence, we think the spread between overnight FX swap and RUONIA is holding negative, at around 100bp now. In light of this, front-end NDF rates tightened 30bp yesterday with 3M NDF settling at 13.06%. However, 1M NDF was down 106bp at 12.43%. Longer dated XCCY swap rates picked up 50-70bp. The IRS curve moved up 15-20bp, so the basis swap narrowed near 15bp.
Maxim Korovin, Tatyana Zueva
VTB Capital analyst
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