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Money market: banks tap CBR's FX swap window


Yesterday, the overnight FX swap rate closed at 12.75%, i.e. nearly flat to Tuesday. However, the weighted-average rate for the whole session printed at 12.96% (+27bp). During the day, it actually hit the CBR's FX swap offer, so banks secured RUB 80bn from the regulator. In addition, demand for overnight repo increased amid outflows of weekly repo funds. The redemption of OFZs for RUB 138bn helped with the liquidity balance, but it was still not enough to compensate for a RUB 576bn liquidity outflow. As we argued yesterday, the balance in the money market is rather thin right now, as the CBR cut the one-week repo offering limit. Meanwhile, banks' free reserves are quite low, since the average balance of sight deposit in the current averaging period is slightly below RUB 1.2tn, the minimum comfortable level to comply with the averaging regulation, in our view. Therefore, we think there is a high probability that money market rates are to stay elevated in the coming days.

NDF rates marginally tightened, with 3M down 23bp to 13.35%, while 6M closed at 12.95% (-25bp) anchored by expectations of the CBR's rate cuts in mid-June. At the same time, bids visibly strengthened amid FX spot weakness and an increase in geopolitical tensions. Hence, longer dated XCCY swap rates widened 15bp. The IRS curve moved up 6-8bp, so the basis narrowed a bit.

Maxim Korovin, Tatiana Zueva
VTB Capital analysts

money market

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