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Money market: subdued FX liquidity demand


Yesterday, the RUB liquidity situation remained stable despite taxes: the weighted average overnight FX swap rate was up 11bp at 17.11%, while the highest print during the session was 17.57%, implying that banks did not tap the CBR’s FX swap window. Meanwhile, regulatory FX liquidity provision facilities came into focus, as total demand was low. The Treasury offered USD 3.0bn for 14 days at a minimum rate of 1.5%, but banks secured only USD 300mn. Further, the CBR held two FX repo auctions for a total amount of USD 12.0bn; total bids hit USD 6.2bn. Thus, banks borrowed USD 5.9bn for 28 days and USD 248mn for one year at rates of 0.67% and 1.13%, respectively. Today, the CBR is conducting a one-week FX repo auction, but excluding this, total FX repo volume outstanding with the CBR is to decline to USD 16.6bn tomorrow.

Meanwhile, the CBR conducted two debt FX 312-P auctions (FX term liquidity in exchange for loans) for USD 1.0bn each. The total demand for 28-day funds was USD 620mn, and for one-year money USD 895mn. All bids were fulfilled at rates of 0.92% and 1.55%, respectively. Interestingly, in each auction there were bids from just two banks, so perhaps relatively low interest in the new FX liquidity facility was a technical issue due to the failure of some banks to finish the necessary paperwork. All in all, the debut FX 312-P could be regarded as a moderate success. As we have previously highlighted, the spread between overnight FX swaps and RUONIA has turned positive, so decreased demand for other FX refinancing tools could be a sign of generally diminished household and corporate demand (on a marginal basis) for hard currency. NDF rates widened yesterday, as investors appeared spooked by FX spot weakness. The 1M NDF closed 2.2pp higher at 20.90%, while the 3M rate climbed 92bp to 19.74%. Longer-dated XCCY swap rates increased near 30-50bp, with two-year rate closed at 14.10%. Subsequently, the 1m3m NDF spread declined to -115bp (from 8bp on Friday), highlighting the fading expectations of monetary easing amid the returned of excessive FX volatility.

At the same time, the 1s2s XCCY swap spread was largely unchanged, at -200bp. 3M MosPrime moved up 10bp to 20.84%, fuelling a 30-40bp upward shift in the IRS curve.

Maxim Korovin, Tatiana Zueva
VTB Capital analysts

money market

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