The situation in the interbank market improved yesterday, as the total volume of banks’ correspondent accounts in the CBR surged RUB 165bn to RUB 1.2tn thanks to the injections of liquidity from the fiscal side. Still, the overnight FX swap closed near 16.0%, while the weighted-average rate for the whole session printed at 15.2% (+20bp) as the CBR decided to keep a relatively tight limit on one-week repo. Yesterday, the regulator offered just RUB 1.35tn, providing only the opportunity to roll over the existing auction-based repo debt. Total demand was RUB 1.5tn, and the average rate came at 15.72%. Unsatisfied bids turned to the CBR’s standing overnight repo window, where banks borrowed RUB 273bn (+RUB 112bn). We had expected the CBR to expand the offering in the one-week repo auction, as RUB 483bn of 312-P is due in the next seven days, in particular.
Meanwhile, banks secured only RUB 169.3bn from Treasury in the two-week deposit auction, out of RUB 200bn offered, at an average rate of 15.20%. However, looming withdrawals are greater in volume and, if Treasury does not announce additional auction, at the end of the week around RUB 247bn of outstanding state deposits could be gone. To some extent, the liquidity outflow would be covered by the VEB, which is offering RUB 120bn at the deposit auction on Friday. NDF rates continued tightening yesterday ahead of the CBR’s policy meeting this week. 1M NDF declined to 13.5%, while 6M closed at 14.5%. In our view, the price action is overdone and we recommend taking profits here as 1M NDF, for example, traded below the onshore XCCY swap market. However, we continue to think that steepeners on the XCCY swap curve looked attractive: yesterday; the 1s2s XCCY swap spread moved up 10bp to -180bp.