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Banking liquidity likely to improve

This morning, overnight FX swap rates opened near 16-17%, i.e. within the CBR's interest rate band. Meanwhile, the CBR reported that banks have RUB 1.5tn on correspondent accounts and RUB 805bn in the CBR's deposits. That high amount of free reserves is clearly excessive for the banking system, so we suppose that banks might release at least a portion of it, which would likely keep overnight interest rates close to the key rate level. Subsequently, we think the spread between overnight FX swap and RUONIA would tighten close to zero levels. On the other hand, the Treasury is to withdraw RUB 280bn from banking deposits this week. However, we also highlight that the consolidated budget likely ended the year in a cash surplus, so we do not rule out the government deciding to roll over the maturing deposits. NDF rates remained in the 24-27% area on the front end, while longer dated XCCY swap rates settled at 11-15% levels, with the 2-year XCCY swap now standing at 14.6%. We highlight that the 1s2s XCCY spread is now trading around -360bp. Meanwhile, the basis settled at -200bp levels.
Maxim Korovin, Tatiana Zueva
VTB Capital analyst

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