Rates Weekly - July 13, 2021. Demand to Pick Up at This Week's OFZ Auctions

> Ruble liquidity: Overnight rates to dip below the key rate. Today, the CBR decreased the limit for its weekly deposit auction to R1.4 trln from R1.52 trln a week ago. Banks' bids fell well short of the limit, coming in at just R0.59 trln. Thus, upon settlement tomorrow around R440 bln of liquidity will be released into the system. An additional R40 bln inflow will come from banks not having fully rolled over their holdings of short-term CBR bills. Today, they purchased R193 bln of these notes in total versus the R232 bln set to mature tomorrow. With all that in mind, the upward pressure on overnight rates should subside. We expect the RUONIA rate to slide from around 5.50% currently to around 5.40% in the coming few days, but we doubt it will go much lower than that, as banks will continue to over-average ahead of the July CBR meeting.> OFZs and rates: Demand should rise at this week's OFZ auctions. This week's offer consists of R10 bln in the 8y OFZ 26237 (March 2029) and R10 bln in the 15y OFZ 26240 (July 2036), for a modest R20 bln for the second week in a row (the weekly volume needed to meet the borrowing plan is around R40-50 bln). This should remain a stabilizing factor for the OFZ market and especially the back end of the curve, since long issues account for most of the new supply. This week, we expect the auction results to be stronger than last week, as Euroclear has started settling the new, on-the-run OFZs, which should boost demand from local banks.