Yesterday, the CBR lowered the limit on the one-week repo RUB 130bn to RUB 1.57tn. The allocation was full amid a RUB 2.05tn total bid; the average rate was 12.01%. Cutting the one-week repo limit just ahead of the heaviest taxes (VAT and MET due tomorrow) looks somewhat surprising, but we think in that way the CBR is starting the sterilisation of liquidity inflows from the regulator’s daily FX interventions. Thus, the total volume of banks’ sight accounts in the CBR is near RUB 1.5tn, implying about RUB 0.5tn in excess reserves. Additionally, banks keep near RUB 320bn on deposits. In yesterday’s interview to Vedomosti, CBR First Deputy Governor Ksenia Yudaeva referred to the experience of other countries with inflation targeting practices, saying that FX interventions did not contradict the main policy target on inflation as they were usually followed by proportionate sterilisation. To recap, since 13 May the regulator has bought USD 5.0bn on the open market, which is close to RUB 260bn.
At the close, the overnight FX swap drifted lower, to 11.65%, though the weighted-average rate remained unchanged at 12.06%. Hence, banks again secured no funds via the CBR’s FX swap window, albeit they borrowed RUB 175bn in the fixed-rate repo. The two-week Treasury deposit auction succeeded, with banks taking the whole amount of RUB 30bn at an average of 11.55%. The NDF/XCCY curve shifted down 10-15bp, with the 1M NDF rate easing to 13.33%. Meanwhile, long-dated IRS tenors widened 10-15bp, with the short end remaining intact.