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Money market: adjusting to the new policy rate band


On Friday, the money market rates moved down following the CBR’s decision to cut the key rate to 11.00% (-50bp). At the close, the overnight FX swap moved down to 10.04%, while the weighted-average rate printed 10.81% (-7bp). Despite the pressure on the FX market, the NDF curve moved down 20-30bp, with the 3M NDF rate edging down to 12.09% (-24bp). Short XCCY rates decreased 12-15bp, with the one-year tenor ending the session at 11.65%, while longer tenors shifted down 6-9bp. The IRS curve moved 10-15bp lower in a parallel shift, while the 3M MosPrime rate remained nearly unchanged, closing at 12.20%. Demand for CBR funding facilities remained modest: banks secured only RUB 27bn in overnight FX repo operations. This week, the Treasury scheduled two deposit auctions (RUB 250bn in total) – the refinancing of maturing budgetary funds, if taken in full. Overall, we think the situation with liquidity is to stay calm this week, as the averaging period enters its final stage, while banks are running their balances with a sufficient margin. Regarding the further monetary policy outlook, we believe that the likelihood of a ‘no change’ decision at the next meeting is increasing (for more details please read CBR Monetary Policy Decision – Growth concerns outweigh transitory inflation surprises), but money market rates are still set to gravitate closer to the lower bound of the policy rates band due to increasing budget spending.

Maxim Korovin, Tatiana Zueva
VTB Capital analysts

money market

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