Yesterday, the situation with banking liquidity improved slightly on the back of fiscal outlays and the settlement of the Treasury’s deposits auction for RUB 200bn. In the light of this, the weighted-average overnight FX swap printed at 15.64% (-10bp). However, in the evening, the money market saw some upward pressure, as perhaps one or few banks had to cover the liquidity gap. Thus, the overnight FX swap surged to 16.1% and the CBR provided RUB 24bn in FX swap operations in addition to the RUB 169bn secured in overnight repo.
Nevertheless, NDF rates tightened 80-100bp yesterday with 3M NDF closing at 17.2%, while 6M NDF moved down to 16.5%. As we have argued before, receiving front end rates looks attractive here, as we expect the situation with banking liquidity to improve. In this regards, we highlight that the Treasury doubled the volume of today’s deposit auction to RUB 200bn. In addition, the strong performance of the OFZ market during the last couple of sessions suggests that offers from non-residents are fading away, in our view, which in turns lowers the bid on NDFs. Longer-dated XCCY swap rates tightened near 10-15bp, in line with the price action on the IRS curve.