On Friday, the situation in the money market was little changed. The overnight FX swap traded below the CBR's offer having closed at 13.28% (flat to Thursday), while the weighted-average rate came at 12.68% (+19bp). The CBR continued pumping liquidity into the banking system with FX interventions. In addition, the Treasury increased the volume of deposits by RUB 28bn. This week, the Treasury is offering RUB 200bn at two deposit auctions, which could potentially inject near RUB 136bn of liquidity, if taken in full. Overall, demand for short-term regulatory funding is set to increase this week, as the heaviest taxes kick off with VAT and MET due today. However, we think the spike in rates will prove temporary and might well be mitigated by the CBR increasing the limit for auction-based repo operations RUB 200-300bn. Additionally, banks are running a balance of RUB 1.5tn on correspondent accounts with the CBR, implying near RUB 200bn in free reserves. Therefore, any spike in NDF implied yields spurred by the pressure on the money market would be a nice selling opportunity, in our view, since we continue to expect further rate cuts by the regulator in the near-term.
The NDF market moved marginally on Friday. In particular, 1M NDF moved up near 15bp to 13.6%, while 3M NDF ended at 13.6% (+8bp). At the same time, longer-dated XCCY swap rates remained largely unchanged. The IRS curve saw some upward pressure on the front-end as well.