Money market: free reserves balance normalising
On Friday, the banking liquidity situation remained unchanged and comfortable. The total balance of banks’ correspondent accounts at the CBR is RUB 1.25tn, close to natural level of RUB 1.2tn that we estimate is needed for the banking system to meet averaging regulation for the calculation of required reserves and the smooth handling of daily transactions. At the same time, banks still keep near RUB 332bn in CBR deposits, which is elevated by some RUB 250bn, in our view. Against this background, the overnight FX swap closed at 14.95% on Friday (and a 16.5% weighted-average rate for the whole session), while rouble deposits rates remained around 17%. Meanwhile, bank debt to the CBR under repo is just RUB 2.5tn, far less than highs seen last year, so regulator has enough fire power to keep rates sticky around the key rate in the near-term. Despite the stable O/N and reduced volatility in the FX spot market, NDF rates widened on Friday – due to profit taking, we believe. In particular, the 1M NDF closed up 56bp at 20.1%, while the 3M NDF moved up 1.8pp to 21.8%. We highlight that the 1m3m NDF spread hit 170bp on Friday, the highest since mid-December and visibly higher than average historical levels. Meanwhile, 3m12m NDF spread remained unchanged on Friday at -400bp. Hence, expectations of relatively high rouble rates are gradually extending in time, in our view. Longer-dated XCCY swap rates moved up near 20-30bp on Friday, yet the IRS curve shifted even more (around 60bp).
Maxim Korovin, Tatiana Zueva
VTB Capital analyst
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