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Money market: overnight converges to the CBR’s benchmark


On Thursday, the overnight FX swap closed at 12.72 (-41bp) and the weighted-average rate printed 12.56%. Hence, banks did not tap the CBR’s FX swap facility for the second day in a row, though they borrowed RUB 47bn in fixed-rate repo operations. The interbank market saw relief with the beginning of the new averaging period, while the regulators continued pumping liquidity into the banking system. So far, in June, CBR has already injected near RUB 70bn via FX interventions, while we estimate the consolidated budget is running a deficit of RUB 540bn and that, coupled with a RUB 115bn in net public debt redemptions, has comfortably offset the RUB 237bn outflow in Treasury deposits MTD. Therefore, banks’ total debt to the CBR continues to decrease, gradually releasing collateral. On the other hand, the total volume of sight deposits in the CBR is near RUB 1.0tn, implying zero-to-negative volume of free reserves, according to our estimates. Thus, banks’ bid for the CBR’s repo is set to remain intact in the coming weeks. Today, the tax period kicks off and the Treasury is to announce deposit auctions for this week, but banks only need to roll over RUB 37bn.

On Thursday, the NDF/XCCY curve widened 4-7bp, though the one-year XCCY rate declined to 12.07% (-24bp). Friday’s price action was negligible in the absence of local players. Overall, the curve implies a 50bp cut in policy rates, we estimate. Onshore 1M XCCY swap rates widened 60bp to 12.36% on the back of profit-taking ahead of the long weekend in Russia. Meantime, the IRS curve adjusted 10-15bp lower, while 3M MosPrime closed at 13.25%.

The main focus today is on the CBR’s policy meeting. We expect the regulator to cut the key policy rate 50-100bp. In our view, the regulator is likely to feel comfortable with how disinflation is going, but we think it might decide to proceed gradually with the monetary policy easing cycle amid the ongoing FX interventions (see story below for details). Meanwhile, we think that it is already priced in in the money market.

Maxim Korovin, Tatiana Zueva
VTB Capital analysts

money market, CBR

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