Yesterday, the bid for liquidity evaporated, as banks accumulated sufficient balances to pass the end of the averaging period comfortably. In the wake of this, the overnight FX swap moved lower yesterday, with the weighted average rate printing 10.26% (-23bp). A few minutes before the bell, FX swap dropped to 8.60%, hitting the CBR’s bid, so banks secured USD 168mn from the CBR.
To recap, the CBR introduced its bid in the overnight FX swap back in September 2014, when the banking system faced a USD liquidity shortage in the interbank market. The implied RUB rate of the CBR’s bid in the FX swap market is 8.5%, compared with the deposit rate of 10%. This is positive for the NDF market, so it comes as no surprise that the NDF curve bull steepened yesterday. However, this signal is also of concern for the FX spot market, which has been underperforming crude for a couple of weeks already. On the other hand, on Tuesday the FX swap-RUONIA spread normalised, increasing to 9bp, but yesterday we believe that the basis returned into negative territory.