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Money market: rates calm down


Yesterday, the overnight FX swap rate closed at 12.8% (-80bp), while the weighted-average overnight FX swap rate printed at 13.11% (-9bp). Hence, as we have suggested, the situation with liquidity improved, helping to bring market rates down closer to the level of the policy benchmark. Specifically, we highlight that banks borrowed only RUB 16bn from the CBR in overnight repo and RUB 29bn in the overnight FX swap window. We think that in the coming weeks, the money market rates are to gravitate around the CBR’s policy rate. Meanwhile, the offshore 1M NDF rate tightened 27bp to 14.14%, while the onshore 1M swap rate moved up 26bp to 13.5%. Longer dated NDFs remained unchanged and the XCCY swap curve narrowed about 5bp. The IRS curve was barely changed as well.

Local sovereign debt: decent demand at the auctions. Yesterday, the Ministry of Finance sold the whole planned size at the auctions. In particular, it allocated RUB 15bn of RFLB 19 at an average rate of 10.7% amid RUB 27.7bn of demand. In addition, all RUB 10bn of RUONIA-linked RFLB 25 was secured amid RUB 28.9bn of demand. The latter comes as a slight surprise, since the previous two auctions did not see great interest. We think that non-government pension funds might have participated in the auction, even though historically that class of investor has refrained from active sovereign debt trading. However, given the absence of a corporate debt pipeline, we think pension funds could have decided to put some cash in sovereign debt, while floating notes fit nicely into their investment profile.

Overall, the new supply did not hurt the secondary market, which continued to enjoy a decent bid. In particular, RFLB 28 (YTM 10.36%) gained 1.1pp in price, while mid-term bonds moved up 0.6-0.8pp in price terms. Hence, the whole curve moved down 20bp.

Maxim Korovin, Tatiana Zueva
VTB Capital analysts

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