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Money market: volatility increased


During Friday's session, the overnight FX swap rate moved from 25% to 5% before closing at 11.09%. The weighted-average rate for the whole session printed at 16.02%. As a result, banks borrowed RUB 213bn from the CBR in the FX swap window as the regulator lifted the limit from USD 2.0bn equivalent to USD 10bn. However, at the end the overnight FX swap collapsed below the CBR's bid of 14.50%. Thus, in theory banks might have secured USD 1.0bn from the CBR, although the rate dropped late in the evening, when the regulator might not have been present in the market. So far, the CBR's data does not indicate that it provided US Dollar liquidity in the FX swap market. Meanwhile, banks also borrowed RUB 264bn in the overnight repo window in addition to the RUB 487bn secured at the overnight repo auction. Hence, the total debt under the repo facility surged to RUB 3.85tn on Friday, a new all-time high. In addition, banks' debt under FX repo is now around USD 10.6bn. Hence, the combined utilisation of market collateral is some RUB 4.5tn, while the CBR estimates the total amount of eligible repo collateral at the beginning of July at RUB 5.1tn. Therefore, we think the repo collateral utilisation ratio might be running close to 90%, leaving limited room for further expansion. However, today the CBR is conducting an ad-hoc 312-P auction (loans used as collateral) for RUB 500bn: funds are provided until 14 January next year. We think banks might have borrowed RUB 350-400bn thanks to the reduction in haircuts on 312-P collateral last week. Meanwhile, banks borrowed an additional RUB 307bn at the standing 312-P auction on Friday.

Overall, we highlight that last week the debt to the CBR under the repo increased RUB 443bn, 312-P was up RUB 212bn, while FX swap picked up to RUB 212bn. This was enough to offset the RUB 250bn outflow of Treasury deposits, RUB 253bn in FX interventions and RUB 249bn surge in demand for cash. However, at the moment banks are showing a strong preference for boosting the liquidity cushion, keeping near RUB 750bn in free reserves now vs. RUB 240-260bn in December 2012-13. Meanwhile, on Thursday the budget injected RUB 500bn of liquidity in outlays, which was perhaps the main factor behind the drop in the overnight FX swap rate. 

Maxim Korovin, Tatiana Zueva
VTB Capital analyst

money market

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