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Money market: FX swap back into policy rates band


With the beginning of the new averaging period, the overnight FX swap normalised, returning into the CBR’s policy rates band. The weighted average rate increased to 10.85% (+58bp), with the FX swap rising to 12.08% at the close. However, by that time the regulator had already left the market, so the CBR’s FX swap facility remained untapped, while banks borrowed RUB 20bn in the overnight repo. As we expected, the FX swap-RUONIA basis turned negative on Wednesday, printing -13bp, but given yesterday’s FX swap performance, it is likely to return into positive territory again. Demand at the Treasury deposit auction was moderate, with only one bid submitted. Nevertheless, the Treasury allocated its RUB 50bn offer in full; the average rate was 10.84%.

NDF rates adjusted higher yesterday: the 9M NDF rate jumped to 12.68% (+33bp), while the three-month tenor closed at 12.08% (+9bp). However, the 1M NDF rate continued to tighten, nudging down to 11.45%. XCCY rates traded mixed. The front end rose 15bp, with the one-year tenor rising to 12.40%, while the belly tightened 10-15bp. The IRS curve shifted up 5-10bp at the front end and in the belly, while long rates eased 10bp. Today, the CBR is to hold a policy rates meeting and is likely to leave the key rate unchanged, though the NDF curve is pricing some policy tightening. Given that, we think that receiving short NDF rates is attractive now.

Maxim Korovin, Tatiana Chernyavskaya
VTB Capital analysts

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