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Money market: short NDF rates adjust lower

On Friday, the overnight FX swap inched up to 14.9% (+93bp), with the weighted-average rate printing 14.45%. As a result, banks secured RUB 134bn in the CBR’s swap window, borrowing an additional RUB 14bn in fixed-rate repo operations. Liquidity in the system looked sufficient, with combined current accounts and deposits being at RUB 1.52tn on Friday morning. However, the last day of VAT and MET payments is set to weigh on liquidity, so much will depend on whether the regulator keeps the limit on the one-week repo auction intact tomorrow. This week, the Treasury is to hold two deposit auctions for a total amount of RUB 300bn. That would contribute RUB 226bn of net inflows, if taken in full. The NDF/XCCY curve moved up 20-30bp, though the front end continued to decline, adjusting to market expectations for a key rate cut on 30 April. Hence, 1M NDF decreased 82bp to 13.83%, while the 3M NDF rate dropped 133bp to 12.81%. Price action across the IRS curve was contained, so overall it remained at the previous closing levels. Today, banks are going through the peak of the tax period, so liquidity is likely to tighten, putting upward pressure on market rates. We think it might be a good moment to receive short NDF rates, anticipating monetary policy easing and higher budget spending in the coming months.
Maxim Korovin, Tatiana Zueva
VTB Capital analysts

money market

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