Yesterday, the money market remained calm, despite the CBR’s decision to cut the one-week repo limit RUB 470bn. Banks took the full limit of RUB 1.12tn amid RUB 1.25tn demand; the average rate was 11.54%. Banks that lacked liquidity borrowed at the Treasury’s two-week deposit auction, securing a total of RUB 92bn out of the RUB 150bn offered. The decrease in one-week repo volumes matches the liquidity inflows coming through the FX channel well, and therefore did not put any pressure on rates. Since 12 May, the volume of one-week repo has declined RUB 500bn, while FX purchases provided near RUB 540bn of fresh liquidity.
The overnight FX swap normalised yesterday, closing at 10.63%. Meantime, the weighted average rate declined a further 10bp, moving to 10.10%. Hence, the CBR’s FX swap facility remained untapped, with banks taking only RUB 22bn in overnight repo. The NDF curve widened 15-20bp at the long end, with the rates moving to 12.0%. We think that selling long NDFs at the current levels is attractive. Meanwhile, the short end remained resilient, with only the 3M NDF rate inching up to 12.17% (+4bp). The XCCY curve shifted up a marginal 3bp, while the IRS curve saw some pressure, with the long-dated tenors rising 20-25bp and the shorter tenors increasing 10bp.