In light of higher demand for FX repo, the repo collateral utilisation ratio is probably approaching 80% now. Meanwhile, the CBR projects that demand for refinancing would be around RUB 6.9-7.5tn, going further in December on the back of higher demand for cash and the Treasury’s withdrawal of deposits, which is in line with our expectations. Assuming that debt under the 312-P window remains constant, it would require a repo increase of RUB 500-600bn. We believe that this is possible with the current collateral base, but challenging, which means that the FX swap would be in demand as well. The latter is subject to a USD 2.0bn limit until 21 December. Therefore, the situation with rouble liquidity could be complicated – especially, starting next week.
Subsequently, the negative spread between the overnight FX swap and RUONIA might widen further. Now it is stands near -100bp, as the overnight FX swap traded near 10.38% (weighted-average) and closed around 10.83%. NDF rates continued widening yesterday, with 1M up 130bp to 17.6%, while the 3M NDF closed up 230bp at 19.8%. Longer-dated XCCY swap rates increased 80-100bp. The IRS curve moved up 50-75bp, so the basis once again became positive on the front end. Meanwhile, implied volatility in the RUB is approaching 50% again.