Rates Weekly - December 8, 2020

> Ruble liquidity: O/N rates to recover on growing demand for liquidity. Last week, due to a liquidity surplus and the reserves averaging period drawing to a close, the RUONIA rate tumbled to 3.64% on Monday, which is 61 bps below the key rate, the most since June. The CBR held a deposit auction today targeting R0.9 trln to prevent rates from dropping even lower. Meanwhile, yesterday banks took only R0.8 trln of the R1.5 trln offered at the CBR's 1m repo auction. It seems that they have turned less cautious and decided to redeem part of the previously borrowed R1.2 trln via the CBR's monthly repo facility. Moreover, there are early signs that the growth of cash in circulation could be more moderate this December than in previous years. After the settlement of CBR deposit and repo auctions tomorrow, we expect the liquidity situation to become more balanced. However, bank demand for liquidity could be somewhat elevated tomorrow as the new reserve averaging period begins. Against this backdrop, we would expect the RUONIA rate to recover to 4.10-4.15% over the next five working days.> OFZs and rates: We expect R50 bln in OFZs to be placed tomorrow; OFZ yields could fall over the next week amid ongoing ruble appreciation. The Finance Ministry announced today that it will offer the 7y OFZ 26236 (May 2028) and 15y OFZ 26233 (July 2035) tomorrow without limits. We expect around R30 bln to be placed in the 7y issue amid likely demand from local banks and R20 bln of the long-dated OFZ to be placed. We would expect demand to bounce back from last week's R18 bln to around R50 bln in total given the ongoing ruble appreciation. The latter, along with possible dovish comments by CBR Governor Elvira Nabiullina tomorrow, should drive ruble rates lower over the next week.