Rates Weekly - March 2, 2021

> Ruble liquidity: O/N rates falling amid liquidity inflow, less demand for it. Last week, O/N rates rose closer to the key rate to about 4.20% after tax payments were paid on Thursday, but are on the decline this week amid liquidity inflows. Through next Tuesday, we expect liquidity to keep flowing in due to budget spending, while demand for liquidity should decrease given the end of the reserves averaging period being next Tuesday, March 9. Hence, we think O/N rates could dip below 4%, while the CBR will likely conduct a fine-tuning deposit auction.> OFZs and rates: Absence of long-dated OFZs tomorrow and geopolitical headlines set positive backdrop for OFZ market. Today, the Finance Ministry announced that tomorrow it will offer the 5y OFZ 26234 (July 2025) and 10y CPI-linked OFZ 52003 (July 2030) with no limit. The absence of long-dated nominal OFZs, which could have been offered at tomorrow's auctions, might be a signal that the ministry prefers not to increase supply of such paper in the last month of the quarter. Also, Reuters reports that senior US administration officials held a conference call with journalists at which they stated that the US would be announcing sanctions against several Russian individuals and entities. Thus, we open a tactical recommendation to buy the 20y OFZ 26230 (March 2039).