Yesterday, the money market was crowded, as the CBR decided to keep conservative limits on the one-week repo auction: FX swap closed at 13.50% (+26bp), while the average rate climbed to 13.31%. The regulator offered RUB 1.58tn, which effectively was refinancing of maturing auction repo funds. Banks secured the full amount at an average rate of 12.90% amid RUB 1.98tn of demand. Consequently, banks actively bid for liquidity on the money market and tapped the CBR’s outstanding facilities. In particular, the regulator provided RUB 85bn in FX swap operations and RUB 280bn in overnight repo. Interestingly, the Treasury two-week deposit auction had no success, with only RUB 6bn secured out of RUB 160bn supplied. It seems that banks prefer to refrain from term instruments in light of the monetary policy meeting, scheduled on 15 June.
In the meantime, market rates continued to adjust lower on the back of rate cut expectations. The NDF curve shifted down 30bp on average, with the one-month tenor declining to 14.03% and the three-month tenor decreasing to 13.46% (-39bp). The XCCY curve narrowed 20-25bp, so the two-year rate closed at 11.65%. The IRS curve turned a bit more inverted, as the front end moved down 10bp and long tenors eased 25-40bp.