Rates Weekly - February 22, 2022. Issuance of Floaters Likely to Resume Soon

> Ruble liquidity: O/N rates to stay elevated given geopolitical uncertainty and outflowing liquidity. With tax payments nearing, the ample liquidity will dwindle, while demand for liquidity could stay elevated given the current geopolitical uncertainty. In addition, that could result in a higher demand for cash, which would represent a liquidity outflow. We would expect O/N rates to stay above the key rate at around 9.6-9.7% over the next four working days. Meanwhile, the CBR will likely keep FX purchases under the fiscal rule on hold (this represents a liquidity inflow, which offsets the outflow related to high O&G tax payments) in the coming weeks. Hence, we would expect the structural liquidity deficit, which has recently emerged but which was rather mild at just R0.3 trln, to become persistent and widen closer to R1 trln. We see O/N interbank rates thus hovering by 10-15 bps above the key rate on average over the coming months - this is in contrast to what we have seen over the last several years, when there was a persistent structural liquidity surplus and O/N interbank rates mostly traded 15 bps below the key rate on average.> OFZs and rates: Finance Ministry likely to resume floater issuance soon. Not surprisingly, the Finance Ministry decided to cancel its auctions this week, similarly to last week. Also of note, Finance Minister Anton Siluanov commented last week on the borrowing program for 2022. He said that there is no need to adjust it yet, but that it would not be feasible to complete this year's program without floaters. In light of that, the ministry is going to resume issuing these papers. Hence, it is quite likely that floaters will be offered at one of the next auctions. Going forward, the market is bound to remain driven by the FX market. In any case, it will be challenging for OFZs to return to last week's levels over the next couple of days.