Rates Weekly - February 16, 2021

> Ruble liquidity: O/N rates dipped on abundant liquidity, but will somewhat recover as the situation is normalizing. Early last week at the end of the previous reserves averaging period O/N rates tumbled to almost 3.25%. The CBR conducted a R3 trln fine-tuning deposit auction, which lifted O/N rates closer to the key rate. However, since last Wednesday, when the current reserves averaging period started, and amid excess liquidity, the RUONIA stabilized 20-30 bps below the key rate, which was quite low. Given the abundant liquidity and new R0.5 trln 9m repo from the Federal Treasury, banks have almost fully redeemed the CBR 1m repo. Over the next four working days, there could be another R0.5 trln liquidity inflow from the budget channel. However, demand for liquidity will also be higher ahead of tax payments next week. So all of this likely means that RUONIA will be below the key rate, but probably not much - we estimate by 15 bps on average - at which level, all else being equal, we would expect it to stabilize over the next month.> OFZs and rates: Supply of OFZs at auctions remains elevated. Tomorrow, the ministry will offer the 7y nominal OFZ 26236 (May 2028) and 15y nominal OFZ 26233 (July 2035). After the announcement today, yields jumped 7-15 bps in tenors longer than 3y. Given the comments about OFZ purchases from local banks, we now think that as much as R50-70 bln may be issued, although a yield premium of 5-7 bps may still be provided.