Rates Weekly - January 28, 2020

> Ruble liquidity: O/N rates to stay elevated due to lack of liquidity after tax outflows. After yesterday's R1 trln tax deadline, banks' correspondent accounts at the CBR are now R0.5 trln lower than required, according to our estimates. Although there will be some liquidity flowing into the system due to budget spending over the upcoming week, it will not be flowing in fast enough to fill this gap. Thus, we expect ruble liquidity to remain in deficit this week and see the O/N rates remaining elevated near the key rate, while banks could start borrowing more actively through the Federal Treasury's O/N repo operations.> OFZs and rates: Finance Ministry may sell R60-90 bln of OFZs tomorrow. The virus news flow and the resulting risk-off mood in global markets led to a rise in yields on EM government local-currency debt last week. We believe investors do not expect the outbreak to last long and are ready to snap up riskier assets once it becomes clear that the epidemic has peaked. At tomorrow's OFZ auction, we anticipate good demand for the new floater from local investors and expect R50-70 bln to be sold, while the Finance Ministry may be able to get off R10-20 bln of the nominal issue on offer. We expect most of the paper sold at tomorrow's auction to go to local investors.