Rates Weekly - March 16, 2022. Ruble Liquidity Situation Stabilizing in Domestic Market, FX Liquidity In Deficit

> Ruble liquidity: Ruble liquidity situation stabilizing in domestic market. The CBR's efforts to provide the needed volumes of liquidity and absorb excess liquidity has kept overnight interbank lending rates within its interest rate corridor. The RUONIA rate has stabilized around 20.5%. In recent days, the ruble liquidity situation has started to improve. The CBR has eased both its provision and its absorption of liquidity at fixed rates, and cash in circulation has dropped following the sharp increase to R2.7 trln over February 24-March 5. Demand for liquidity could pick up ahead of the CBR meeting on March 18, as the regulator could deliver a significant key rate hike in light of the high inflation. This could cause the interbank rate to push ahead to 21% this week.> FX liquidity: Deficit of FX liquidity in domestic market, deficit of ruble liquidity offshore. Following the restrictions on using part of the CBR's international reserves, a sharp deficit of FX liquidity emerged in the local money market. The situation has started to stabilize in recent days and ruble rates on 1d FX swaps surged from minus 238% to minus 10-20% over March 9-11. However, in recent days ruble rates on 1d FX swaps offshore have surged, reaching as high as 500% on March 15. This is an indication that the flow of ruble liquidity offshore has been restricted - this is a common practice during periods of instability.