Rates Weekly - February 8, 2022. Overnight Rates to Surge on Rate Hike Expectations; CBR Could Return to FX Market Sooner

> Ruble liquidity: Rates to surge on rate hike expectations; CBR could return to FX market sooner. This week, O/N rates are set to surge, as banks will hoard liquidity ahead of what is expected to be a 100 bp key rate hike on Friday. Moreover, given that geopolitical tensions seem to be de-escalating, the ruble could continue appreciating toward 74 this week. As a result, on Friday the CBR could announce a resumption of open-market FX purchases under the fiscal rule starting next week. This would cap further ruble appreciation for a while. However, it would also mean that ruble liquidity from FX purchases would start flowing in, and hence the structural liquidity surplus would remain and O/N rates would trade at around the key rate minus 10 bps on average.> OFZs and rates: Finance Ministry to test demand for 15y nominal OFZs. The Finance Ministry has selected two OFZ issues for tomorrow's auctions: the 14y OFZ 26240 (July 2036) and the 10y CPI-linked OFZ 52004 (March 2032). The entire amount left to be tapped in both issues will be on offer, R300 bln and R216 bln, respectively. That said, we doubt that the auctions will be as strong as last week. Even during good times, placement volumes at auctions for the 14y OFZ 26240 never exceeded R50 bln per auction last year, while demand was always below R70 bln. In addition, many market participants may prefer to stay on the sidelines ahead of the CBR decision.