Yesterday, banks actively bid for liquidity, as current accounts remained stretched at RUB 1.10tn (as of Tuesday morning). The CBR increased the limit on one-week repo RUB 550bn to RUB 2.17tn, and banks took it in full amid RUB 2.25tn demand (the average rate printed 12.67%). In addition, the Treasury finally garnered solid demand, allocating RUB 100bn of deposits at an average rate of 12.50%. Demand on the overnight FX swap market was also high, so the rate hit the CBR’s offer level, closing at 13.63% (+26bp). The weighted-average rate remained at
13.33%. In light of this, banks secured RUB 52bn in FX swap from the regulator, complementing it by RUB 23bn in overnight repo. Higher market rates drew the IRS curve up 10-20bp, but the NDF/XCCY curve was resilient to the pressure: longer XCCY rates declined a marginal 6bp, while short NDF and XCCY tenors eased near 20bp. We think recent regulatory
liquidity inflows will help to restrain the pressure stemming from the budget, but we think the rates will remain elevated during the tax period. Nevertheless, we recommend receiving short NDF rates, especially given market consensus on another rate cut at the CBR’s monetary policy meeting on 15 June.