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Money market: FX volatility pushes rates higher


The tax period has passed nearly unnoticed for liquidity so far, with the correspondent accounts rising to RUB 1.41tn yesterday morning. However, next week bid for funding is to increase, as banks are due to pay MET and VAT on 25 August and CIT on 28 August. Yesterday, the overnight FX swap closed at 11.07%, while the weighted average rate slightly declined, printing 11.02%. Banks increased the volume of the fixed-rate repo with the CBR only marginally to RUB 20bn, showing no appetite for the FX swap facility. Meantime, Treasury auctions continued successfully, with banks securing the entire amount of RUB 30bn at a 10.80% average rate. Hence, today the outstanding volume of Treasury deposits is to increase to RUB 418bn, the highest level since January.

NDF rates remained intact, except for the 12M NDF rate, which widened to 12.70% (+15bp). At the same time, the XCCY curve continued travelling north amid increased FX volatility: the front end and the belly picked up 20bp, while long tenors increased 15bp, moving above 10.0%. Widening along the IRS curve was a bit milder: short rates rose near 5bp, while the long end increased 10bp. Basis narrowed 5-10bp, with one-year tenor converging to zero.


Maxim Korovin, Tatiana Zueva
VTB Capital analysts

money market, NDF

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