Money market rates remained elevated last week, with the overnight FX swap closing near 15.0% on Thursday, whilst the weighted-average rate printed at 14.75% (-16bp).
We think that in the coming weeks, short-term rates will be anchored closer to the level of the key rate, and the bid for overnight FX swap with the CBR is likely to ease as the tax period has ended, while banks would be more eager to borrow from the Treasury and other regulators after the policy rate cut. In particular, we highlight that the Treasury is offering RUB 400bn in two deposit auctions at rates between 12.5% and 12.7%. We expect solid demand and the allocation to be close to full, which would inject RUB 200bn of liquidity into the banking system.
In addition, the April-May averaging period is heading to an end, and that is likely to unlock additional pools of liquidity to banks. In the NDF market, rates ended barely changed on Thursday, with 1M closing at 14.38% (-25bp), while 3M ended a 13.79% (-19bp). At the same time, the 1M swap traded in the MICEX moved up 50bp to 12.92%. In the light of CBR's policy decision last week, we think offshore NDF rates look interesting to receive here, while onshore swap curve trades are close to fundamentally justified levels.