Yesterday’s session in the money market was volatile. Hence, in the morning, the overnight FX swap spiked to the CBR’s offer at 10.50% and stayed there for quite a while, but at the end of the day, it had dipped to 8.45%. The weighted-average rate for the whole session printed at 10.38%, while banks secured RUB 28bn from the CBR. However, we believe that the spread between the overnight FX swap and RUONIA remained deeply negative, because banks borrowed RUB 534bn in the overnight repo from CBR (up from RUB 159bn the day before). In light of this, we estimate that RUONIA was hovering well above 11.00% yesterday.
Overall, the CBR’s outstanding repo debt reached RUB 3,744bn on Thursday, a fresh all-time high. Simultaneously, debt under the 312-P facility runs at RUB 3.4tn now (new highs as well), while the volume of free reserves in the banking system is far above the needed amount (RUB 1.6tn on correspondent accounts). We believe that expectations of a rate hike drove the elevated demand for refinancing: banks decided to boost the average balance of correspondent accounts a little ahead of schedule at relatively low rates. We believe that the demand for refinancing will decline in the near term – yet not completely, because of the Treasury’s deposit outflows. The NDF market continued calming yesterday, with the front-end rate now traded at reasonable levels. The 1M NDF declined 440bp to 14.50%, while the 3M NDF settled at 15.05%. The longer-dated, 12M NDF closed at 13.10%, while the 2-year rate declined to 11.95%, with the 1s2s spread now being at -115bp. Price action on the IRS curve was less impressive, meaning the basis swap spread returned to -185bp.