On Friday, the overnight FX swap continued to trade in a narrow range, with the weighted-average rate remaining anchored to 11.00%. However, as the day before, the overnight FX swap spiked at the very end of the session, hitting 12.59% (+38bp). By that time the regulator had already left the market, so its standing FX swap facility remained untapped again, though banks refinanced RUB 39bn of overnight repo. Today, MET and VAT are due, but the system has accumulated a solid reserve of liquidity, which should restrain the pressure on the money market. The combined volume of sight deposits was at RUB 1.82tn as of Friday morning, and moreover this week banks are to enjoy a parade of regulatory auctions. Today, the CBR is to conduct the 18-month 312-P auction with a RUB 500bn limit, tomorrow VEB will offer RUB 60bn of deposits, while the Treasury has scheduled three deposit auctions totaling RUB 300bn.
Amid the pressure on the FX market, the NDF curve moved up 20-25bp, with the three-month rate closing at 12.54% and 12M NDF rates increasing to 11.80%. The XCCY curve widened a moderate 4bp, though the one-year rate jumped to 11.80% (+16bp). On the contrary, the IRS curve settled lower, with the belly tenors declining 10-20bp and the short tenors slipping a marginal 3bp. On Friday, the CBR holds a monetary policy meeting, where we expect the regulator to deliver a 50bp cut. We think that the easing cycle will continue, but at a slower pace, so receiving longer NDF/one-year XCCY rates would be attractive, in our view.