The situation in the money market remained rather calm yesterday, even though companies paid corporate profit tax. At the end of the day, overnight FX swap moved down to 12.95% (-3bp) and the weighted-average rate was around 13.0% for the whole session. Banks secured only RUB 1.0bn from the CBR in the FX swap market and near RUB 28bn in overnight repo. At the same time, the total volume of banks’ sight deposits in the CBR declined to RUB 896bn and the average balance in the current averaging period runs near RUB 1.2tn.
Separately, we highlight that the Treasury allocated only RUB 14bn on one-month deposits at an average rate of 12.72%. Therefore, government deposits are set to decline RUB 43bn today. Hence, banks have almost no free reserves now, which means that bid for liquidity is to pick up in the coming weeks. However, perhaps banks are hoping that the beginning of a new month will bring some inflows.
NDF rates widened near 20bp in 6-12M tenors, but remained unchanged on the front end with 3M ending at 13.8%. Meanwhile, the onshore 1M XCCY swap narrowed near 15bp to 12.5%. Hence, FX spot weakness is pushing implied yields higher, but expectations of monetary easing are anchoring the front end. This week, Rosstat reported weekly inflation at 0.1% for the fifth consecutive week. Therefore, sequential CPI remains around the average weekly pace of consumer price growth seen in 2013-14, when headline inflation was in a single-digit range. In the light of this, we stick with the view that the CBR will likely cut the policy rate near 100-150bp at June’s meeting.