Yesterday, the overnight FX swap ended at 12.3% (-68bp), whilst the weighted-average rate for the whole session printed at 12.95% (-6bp). Banks secured only RUB 28bn from the CBR in the overnight repo facility and refrained from tapping the FX swap window. However, we highlight that this week the Treasury has visibly stepped up its repo operations, offering RUB 100bn for the one-day repo yesterday. There are no allocation results so far, but given strong demand last week we think that all RUB 100bn was secured. In our view, the additional liquidity inflow helped to improve the balance in the money market markedly, with the CBR’s continued FX interventions and declining cash in circulation. For the near-term outlook on rates, it is important that the CBR does not squeeze the limit for one-week repo, as banks need to boost the average balance of current accounts to meet the regulatory threshold to manage required reserves.
NDF rates narrowed marginally on a 6M-12M horizon, with the 6-month rate closing at 13.15% (-15bp). At the same time, the front end of the NDF curve saw some bids, while onshore 1M XCCY swap rates continued declining to close at 12.27% (-25bp). Longer dated XCCY swap rates stayed unchanged, or inched up slightly. Receiving the short end continues to look attractive here, as we expect the CBR to cut policy rates 100-150bp in mid-June.