Rates Weekly - January 21, 2020

> Ruble liquidity: O/N rates to rise above key rate on tax-related liquidity outflow. Last week and early this week O/N rates remained subdued, mainly below 6%, as liquidity was flowing in. Although this will remain the case this week, we would expect O/N rates to rise as banks will be hoarding liquidity ahead of Monday's R900 bln tax payments. Due to such a significant outflow, we would expect liquidity to be in deficit early next week, while banks will likely borrow about R300 bln via repo from the Federal Treasury and O/N rates will likely rise above the key rate of 6.25%.> OFZs and rates: President Putin's new spending initiatives would not pose risks to CBR. The initiatives should lead to only minor price growth acceleration (we estimate 0.2 pp) this year amid the ongoing disinflation. This means that the CBR would be able to cut the key rate by 25 bps in February and then another 25 bps in both 3Q20 and 4Q20. Meanwhile, at tomorrow's OFZ auction we think that R30-50 bln of the 6y nominal OFZ will be placed (that, together with the CPI-linked paper that will be issued should mean R75-100 bln in OFZs are issued tomorrow). The view that CBR rate cuts may accelerate together with the redemption of R250 bln worth of OFZ floating-rate bonds tomorrow will be supportive for the auctions.