The situation with banking liquidity remained tense yesterday, as Wednesday’s taxes erased near RUB 450bn of banking liquidity, which was only partially offset by the increase in Treasury deposits. Hence, the combined volume of banks’ deposits and current accounts in the CBR declined to RUB 1.35tn. In our view, the volume of free reserves is close to zero now. Thus, it is not surprising that the weighted-average overnight FX swap rate was 15.89%, having touched 16.1% at some point. However, banks did not hit the CBR’s FX swap offer. RUONIA likely stayed close to 15.50%. Meanwhile, the Treasury allocated RUB 180bn on one-month deposits at an average rate of 15.47% amid RUB 250bn of demand. In the overnight repo window, banks secured RUB 100bn (+RUB 17bn) from the CBR.
Today, February’s tax period ends, so the beginning of the new month next week is set to bring relief to the banking system, liquidity-wise. We expect overnight money market rates to move closer to the level of the CBR’s key rate. However, banks would have to run a balance of correspondent accounts above or around RUB 1.2tn in order to comply with the averaging regulation for mandatory required reserves and preserve the smooth execution of clients’ orders.
NDF rates continued moving higher yesterday, once again completely ignoring the stronger FX spot. At the end of the day, 3M NDF moved up 30bp to 18.1% and 12M NDF ended 16bp up at 15.2%. Longer dated XCCY swap rates widened 10-15bp as well. The IRS curve picked up 20-30bp, even though 3M MosPrime inched down 3bp to 17.08%. As we have said before, we see the current spike in NDF rates as technical and temporary, which offers a good selling opportunity.