Rates Weekly - March 23, 2022. Demand From Retail Investors Supported OFZs Once Trading Resumed

> Ruble liquidity. Rates to rise due to taxes, but in the medium term ruble liquidity will continue to rise. This week will see major tax payments (including profit tax for 2021 and MET for 4Q21). We estimate the total tax bill at around R3.6 trln. In light of this, the interbank rate will likely climb to 20% but is unlikely to move above that given that, in our view, there will be offsetting factors such as the placement of budget funds via deposits, Federal Treasury repo, CBR via fine-tuning auctions and the decrease of cash in circulation following the surge in late February and early March. Meanwhile, in the medium term liquidity will continue to flow in, which will be partly attributable to investment from the NWF. The structural liquidity deficit could even turn back into a surplus. One reason for this may be on account of the fact that on Monday the CBR decreased reserve requirements (effective April 1) for ruble and FX reserves to 2% in both cases (from the respective 4.75% and 8% levels seen before the beginning of March).> FX liquidity: FX liquidity coming in, including in yuan. Recent days have seen growth in both ruble rates on MOEX overnight FX swaps. This has come amid higher volumes. This is an indication of an inflow of FX liquidity and something of a normalization. What is interesting is that in recent days there has been a significant increase CNY/RUB volumes on the exchange, both in the spot and swap markets. Given that last year trade between Russia and China totaled $140 bln, the share of the ruble and yuan in settlement will likely increase. We expect to see a further increase in CNY/RUB volumes, both in the spot and swap markets.> OFZs and rates: Demand from retail investors supported OFZs once trading resumed. Yields on OFZs in the 5y and longer segment may continue to slide in the near future, but it will be at a much slower pace. We would bring attention to the CPI-linked bonds, which are currently trading with real yields of 2.7-4.0%.