On Wednesday, banks cut the amount of funds secured in the overnight repo window by RUB 200bn; yesterday it also remained low. Simultaneously, the State Pension Fund withdrew RUB 100bn from banks’ deposits. The liquidity outflow was partially covered by a RUB 143bn increase in the Treasury’s deposits. The total volume of banks’ correspondent accounts in the CBR declined RUB 124bn, but still remains at a comfortable level of RUB 1.3tn. Meanwhile, yesterday the Treasury placed RUB 115bn on banks’ deposits out of the RUB 150bn offered. The average rate printed at 17.5%. Given that January’s tax period is over, we highlight that this month the budget performed controversially compared with previous years. Hence, we estimate the YTD budget surplus at less than RUB 100bn, whereas in January last year it was more than RUB 1.0tn, and before that the average January surplus tended to be near RUB 400-600bn. In addition, given the RUB 438bn increase in Treasury deposits, the consolidated budget played a visibly positive role liquidity wise (which is not a surprise given previous comments from MinFin regarding the usage of the Reserve Fund). In addition, returning cash to the banking system boosted liquidity by RUB 1.0tn in January, an unusually large figure vs. previous years. Combined, these two factors allowed the CBR to reduce the amount of refinancing to banks by RUB 1.2tn and release the lion’s share of collateral without harming interest rates. Looking ahead, we expect the liquidity situation to remain comfortable.
Separately, we highlight that the weighted average overnight FX swap rate printed at 16.52% yesterday, likely sending the overnight FX swap-RUONIA basis back into negative territory (albeit far from the alarming levels so far). In the light of this, we noted that despite FX weakness, front-end NDF rates tightened near 60-90bp with 1M closed at 22.45%, while 3M ended at 21.2%. Longer-dated XCCY swap rates tightened as well, so the curve’s shape did not change. Today, the key focus for the money market will be on the CBR’s policy decision.