NDF rates dropped substantially in yesterday’s session: 600-650bp on the front end and 200-400bp on the longer tenors. The price action happened almost in a liquidity vacuum, just as was the push up before that. 1M NDF closed at 17.8% yesterday, while 3M settled at 17.8%. The 12M NDF rate slipped to 14.6% and the 2-year XCCY swap ended at 12.9%, so 1s2s spread moved from -270bp to -175bp. In addition, the spread between offshore and onshore rates decreased to more sensible levels, but still stayed elevated compared with the normal historical range. Interestingly, the overnight FX swap remained elevated yesterday, because some banks still struggled to fulfil the averaging regulation requirements. Hence, at the end of the day the overnight FX swap closed at 10.6%, so banks secured RUB 56bn from the CBR. Meanwhile, the weighted-average rate for the whole session printed at 9.74% (+78bp).
However, we think the spread between overnight FX swap and RUONIA remained negative, at -75-100bp, as rouble liquidity constraints pushed the latter up as well.