On Friday, the overnight FX swap closed at 13.01% and the weighted-average rate for the whole session printed at the same level; both were generally in line with the previous day’s levels. Liquidity in the banking system was also little changed. The marginal outflow of Treasury deposits was offset by continued FX purchases by the CBR. Hence, the volume of banks' sight deposits in the CBR moved up to RUB 955bn (+RUB 18bn), still below the necessary level to comfortably meet the averaging regulation requirements for the management of mandatory reserves. Therefore, unless the budget pumps up liquidity (fairly possible, in our view), money market rates are set to see some pressure at the end of this week. In addition, it is important that the CBR sets a one-week repo limit sufficient to roll over existing debts.
Meanwhile, we noted NDF rates tightened near 20-25bp on Friday, with 3M down to 13.8%, while 12M closed at 12.6%. Longer-dated XCCY swap rates narrowed to the same amount on average. In the MICEX, the 1M XCCY swap rate ended 26bp lower at 12.4%. We think the RUB bounce fuelled appetite for receiving rates at the end of last week. However, expectations of further rate policy rate cuts provided the necessary background. This morning, MinEco highlighted some flash growth estimates for April, which add to dovish expectations, we think.