With the end of the tax period, the overnight FX swap continued to adjust lower, closing at 10.78% (-22bp) yesterday. The weighted average rate declined to 11.03%, easing 46bp vs. the previous session. Due to the settlement of regulatory auctions, appetite for liquidity decreased, while the correspondent accounts restored to RUB 1.15tn. Hence, banks cut the debt on fixed-rate repo operations to RUB 18bn. Today, the Treasury holds the third auction this week, tendering RUB 50bn. However, even if taken in full, on a net basis it would be just refinancing of deposits maturing on Friday.
Stabilisation on the domestic FX market removed the pressure from the NDF/XCCY curve. The 3M NDF rate dropped to 12.35% (-44bp) and the six-month tenor closed at 12.15% (-35bp). The belly of the XCCY curve shifted down 20-25bp, while the other tenors narrowed near 15bp. IRS rates settled 10-15 lower, 3M MosPrime ended the session at 12.33%. Onshore 1M XCCY swap traded slightly below the key rate at 11.3% yesterday. We expect the CBR to cut rates 50bp at its monetary policy meeting tomorrow. In our view, halting FX purchases marginally increases the probability of such an outcome. Therefore, we think that receiving the short end still looks appealing here, especially, given the favourable situation with banking liquidity.