Rates Weekly - June 9, 2020

> Ruble liquidity: CBR rate cut expectations to weigh on O/N rates, but liquidity outflows will give a boost. Over the last week, O/N rates dropped due to a liquidity surplus at the end of the current reserves averaging period. Over the next week, they look set to remain low, as a new period will start and demand for liquidity will be subdued due to expectations of at least a 50 bp key rate cut by the CBR on June 19. On the other hand, we see a R200 bln liquidity outflow materializing this week, attributable to rising cash in circulation, insurance payments, OFZ placements and FX sales under the budget rule. This should prevent O/N rates from taking a plunge, with them staying at 5.1-5.3%.> OFZs and rates: At OFZ auctions tomorrow, R50-80 bln should be placed, versus R109 bln last week. We expect that around R40-60 bln will be placed in the new 5y issue, which is average for the first auction of an issue, though at a 3-5 bp yield premium at 5.22-5.25%, we estimate, given the current shape of the curve. We do not expect the new-style floaters to be offered to attract much demand given the expectations that the CBR will cut rates by 50-100 bps at its meeting this month. We believe only R10-20 bln will be placed.