Yesterday, the overnight FX swap closed flat at 14.98%, with the weighted average rate picking up 13bp to 13.72%. Banks did not tap CBR’s FX swap facility, at the same time having reduced the debt on overnight repo RUB 70bn to RUB 33bn. The budget continued to boost liquidity in the system, so banks’ overnight deposits doubled to RUB 426bn on Tuesday, while current account balances nudged up to RUB 1.15tn. Hence, it was not surprising that banks took only RUB 5bn of deposits at the VEB auction; the rate was set at 13.70%. The March-April averaging period comes to an end this week, and we expect demand on regulatory funds to strengthen next week.
The NDF/XCCY curve continued tightening, supported by a stronger FX spot market and expectations of front-loaded rate cuts by CBR in that light. The front-end NDF rates tightened near 20bp and long-dated tenors moved 40bp down. 1M NDF rallied, falling 105bp to 14.08%, so the 1m3m spread has converged to zero. The IRS curve also shifted down 25-55bp, meaning the front-end basis widened 15-20bp.