Rates Weekly - December 24, 2019

> Ruble liquidity. O/N rates to keep rising due to tax-related liquidity outflow. Bank demand for liquidity has finally risen today. The O/N FX swap rate has shot up around 30 bps to 6.34%, while the interbank rate has climbed 8 bps to 6.10%. We expect rates to continue rising tomorrow and to reach around 6.3% by the end of the week, as there will be a liquidity deficit due to a tax-related outflow of around R1 trln. However, this will be smoothed out at least to a certain extent by an inflow from the settlement of CBR operations tomorrow and budget spending later this week. We note that the settlement of the second leg of today's CBR deposit auction has been moved from next Wednesday to next Monday due to the holidays. So, this Friday the CBR will likely conduct another deposit auction, the first leg of which will settle next Monday and the second probably on January 15.> FX liquidity FX liquidity could decline this week due to Gazprom payment to Naftogaz. FX liquidity remains benign, but could drop this week by about $3 bln. Gazprom recently agreed to pay Naftogaz Ukrainy $2.9 bln plus accrued interest by Sunday to settle a Stockholm arbitration court ruling from 2017. Against the backdrop of a feared global FX liquidity squeeze at year-end, such an outflow could lead to a significant drop in short-term FX swap rates, which have rallied 40 bps recently on rising demand for ruble liquidity. Thus, we recommend receiving them.