Rates Weekly - May 18, 2021

> Ruble liquidity: O/N rates poised to ease slightly this week but should rise next week due to taxes and dividends. O/N rates have climbed close to 5% since last Wednesday, when the new reserves averaging period began, as demand for liquidity has picked up and significant outflows have taken place. Liquidity should be ample from Wednesday to Friday this week thanks to CBR and Federal Treasury operations, and we see O/N rates retreating to 4.85%. However, next week around R1.2 trln in taxes and R422 bln in Sber dividends are due to be paid. Amid such significant liquidity outflows, we expect O/N rates to climb back toward 5% next week.> OFZs and rates: A conservative offering from the Finance Ministry at this week's auction. Tomorrow, the Finance Ministry will auction off the 7y OFZ 26236 (May 2028), the 18y OFZ 26230 (March 2039) and the CPI-linked OFZ 52001 (July 2030), offering a respective R24.6 bln, R7.8 bln and R15.6 bln in the issues. Although the ministry surprised us by choosing to offer up the longest-dated issue available (we had expected it to instead offer up the 4y issue, which has not been placed in quite some time), the size of the offering is too small to weigh significantly on the long end of the curve. Overall, we see the Finance Ministry's approach as relatively defensive, as the offering is lighter in DV01 terms than last week's (R30.8 bln in the 14y fixed-coupon issue and R25 bln in the 10y paper).