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Money market: keeping the liquidity balance

Yesterday, the situation with banking liquidity remained stable, although the total balance of current accounts with the CBR declined slightly, to below RUB 1.3tn. We note that the overnight FX swap moved up a tad to 16.78% (+27bp). However, the weighted-average rate increased just 5bp to 16.61%. At the same time, rouble deposit rates were little changed. The Treasury tested the repo instrument yesterday, offering RUB 20bn in overnight repo, of which banks secured RUB 10.75bn at 17.0%. Today, the Treasury is to conduct a 35-day deposit auction for RUB 200bn; this would be a net liquidity injection, which is to help get through VAT payments on Friday. Nevertheless, the volume of banks’ deposits with the CBR remains relatively high, at RUB 480bn. NDF rates continued tightening yesterday. In particular, 1M and 3M NDF rates declined near 100bp and 150bp, respectively, to the 19% level. Longer dated rates moved lower as well, with the one-year XCCY swap rate closing at 16.85%. However, the 3m12m spread bull-steepened to -170bp, from -300bp; the 1s2s XCCY spread is gradually moving up as well, highlighting that concerns over short-term volatility in the money market are easing. However, in our view, the price action on the front end of the NDF curve looks slightly overdone, as the term premium has decreased visibly in recent weeks. The IRS curve moved down as well, with 3M MosPrime settling at 21.6% (-23bp). However, the basis swap widened near 20bp to -310bp on the front end.
Maxim Korovin, Tatiana Zueva
VTB Capital analyst

money market

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