On Wednesday, we were mistaken in saying that banks did not tap the overnight repo window on Tuesday, because the data came out after our note was published. Actually, banks secured RUB 502bn in the overnight repo facility at 18.0%, bringing total repo debt to RUB 3.7tn. Yesterday, the CBR conducted an ad-hoc one-day repo auction for RUB 150bn: the entire amount was taken at an average rate of 17.49% amid demand of RUB 237.2bn.
However, the liquidity situation became quite tense yesterday with the overnight FX swap closing at 60.0%, while the weighted-average rate for the whole session printed at 21.0%. It therefore did not come as a surprise that banks took the maximum from the CBR’s FX swap window (RUB 145bn). We think the RUB 150bn outflow in Treasury deposits might have triggered the liquidity squeeze amid the collateral utilisation ratio running near potential now. We highlight that on the back of elevated volatility, the collateral pool has naturally declined now amid negative mark-to-market. Meanwhile, the balance of correspondent banks’ accounts in the CBR surged substantially, which illustrates the banks’ preference for liquidity. The latter highlights that the efficiency of the interbank lending market has declined, as many credit lines have likely been shut down, cut and/or required additional credit enhancement, which is probably hard to provide in light of recent FX and rates swings. NDF rates surged near 5-9pp with 1M NDF touching 38%, while 3M closed at 33% amid rather poor liquidity. The spread between offshore and onshore rates surged markedly yet again. IRS rates moved up as well, but the basis still narrowed.