Rates Weekly - August 11, 2020

> Ruble liquidity: Overnight rates to be slightly elevated, as banks hoard liquidity ahead of taxes. Last week, O/N rates rose to 4.15% on average. It seems that at the beginning of the new reserves averaging period demand for liquidity has increased, as banks want to hoard it ahead of significant tax payments due in two weeks. Over the next week, we expect a slight liquidity surplus of R200 bln, but think that banks' demand for liquidity will stay elevated, as was the case last week. We thus see O/N rates stable at around 4.15%, 10 bps below the key rate, which is slightly elevated relative to the usual 20-25 bps below.> OFZs and rates: Only one OFZ issue to be auctioned tomorrow, a 4y floater. We think that by the time the auction rolls around, the paper's discount margin could expand to 40 bps from the current 33 bps, where we think the Finance Ministry could raise around R60 bln. If the decline in the paper's price turns out more modest than that, we believe that only around R30 bln will be placed. We assume no yield premium to the secondary market will be given.