Rates Weekly - December 3, 2019

> Ruble liquidity: O/N rate volatility could pick up on both surging supply and demand for liquidity. Last week, O/N rates remained elevated at about the key rate, as liquidity was scarce at the end of the reserves averaging period, although not by as much as we had feared. This week, rates could decrease a bit thanks to an inflow of liquidity, although likely not by much, while volatility could pick up, as we expect demand to also pick up. > FX liquidity: Outlook for FX liquidity improves on potential cancellation of additional CBR FX purchases. FX liquidity remained plentiful and shorter USD/RUB bases are increasing. Longer-term ones are lagging, but we expect them to increase too, especially the 3y one, as we have learned the CBR might cancel additional FX purchases starting in the middle of next year, which would mean better FX liquidity in the long term.> OFZs and rates: November monthly inflation is due on Friday after the CBR silent period starts. The main event this week is Russian monthly inflation, which will be published on Friday afternoon. But this will come after the CBR's blackout period ahead of its December 13 rate decision has begun. A low reading would suggest a 50 bp rate cut. We think that this week the bank will hint at how low it will tolerate inflation falling before it opts for a 50 bp cut instead of a 25 bp one.