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Money market: 3M NDF rate at lows against overnight FX swap


On Friday, the overnight FX swap rate narrowed 107bp, closing at 13.99%; the weighted-average rate printed 13.83%. As a new averaging period kicked off, appetite for liquidity re-emerged, so banks borrowed RUB 131bn via the CBR FX swap and RUB 62bn in the overnight repo window. The tax period starts this week, so we expect more active bid for regulatory funds. The Treasury announced two deposit auctions for a total amount of RUB 300bn, while VEB is set to offer RUB 110bn of pension funds for one week. If all the above mentioned auctions see 100% allocation, the net liquidity injection would amount to RUB 98bn.

As liquidity remains sufficient and given the strong FX market, rates continued to adjust lower amid expectations that a strong FX spot market will open the door for more front-loaded rouble rate cuts. Price action at the front end of the NDF/XCCY curve was the most pronounced, with the 12M NDF rate dropping 104bp to 12.40% and the three-month tenor closing at 13.50 (-89bp). Hence, the spread between the latter and the overnight FX swap was near -30bp, a two-year low. The long end of the curve traded mixed, but the swings were contained, so the curve steepened with the 1s2s XCCY swap spread tightening to -110bp, while it was near -190 a week ago. Separately, the IRS curve shifted down 15bp, following 3M MosPrime, which nudged down to 14.85 (-27bp).

Maxim Korovin, Tatiana Zueva
VTB Capital analysts

money market

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