The situation on the money market remained tense yesterday. In particular, the weighted-average overnight FX swap rate picked up 7bp to 12.41%, although it closed below the CBR’s offer at 12.28%. Nevertheless, banks secured RUB 71bn from the regulator in the FX swap window and an additional RUB 178bn in overnight repo. Therefore, banks’ total recourse to overnight standing facilities reached RUB 249bn, up from RUB 168bn on Friday. We think the payment of corporate profit tax might have subtracted RUB 100-150bn in liquidity, so the total balance of banks’ current accounts in the CBR slipped below RUB 1.0tn.

As the tax period has ended, the situation in the money market is likely to improve, with many banks busy replenishing the reserve position. Hence, it is important how tight the CBR sets the limit for the one-week repo today. However, liquidity keeps coming in thanks to the regulator’s daily FX interventions. Meanwhile, the Treasury allocated RUB 30bn on two-week deposits out of the RUB 100bn offered yesterday. The weighted-average rate was 11.5%.

NDF rates widened 20-40bp on the front end, trailing the performance of the FX spot with the 1M closing at 13.74%, whilst 3M ended at 13.27%. We highlight that the onshore 1M XCCY swap rate edged 20bp lower to 11.84%. Longer dated XCCY swap rates moved up 5-15bp. In our view, it still looks interesting to receive relatively longer tenors, because we continue to expect further rate policy cuts from the CBR, albeit at a slower space, which is already reflected in the market in the form of steeper curves. In addition, the banking system is gradually shifting from the position of a liquidity deficit against the regulator to a surplus, thanks to the ongoing FX interventions coupled with the budgetary deficit. In the end, the CBR’s deposit rate could become a more important anchor than the rate on lending facilities.