Rates Weekly - November 11, 2020

> Ruble liquidity: O/N rates plummeted last week and given the ample level of ruble liquidity are unlikely to return to recent highs. The RUONIA rate fell from around p, 4.1% at the start of last week to 3.8% this Monday, while the O/N FX swap fell much further than that. We think that was mainly due to subdued demand for rubles as the reserves averaging period neared its end (today). Meanwhile, liquidity kept flowing into the system through the budget channel. Despite this, the CBR increased the limit at its monthly repo auction yesterday to R1.2 trln, and banks took in the full amount. We suspect that the reason that banks' demand for CBR repo was so high this week was that they expect the Finance Ministry to keep placing OFZs in high volumes, as it did last month, while not returning nearly as much to the banking sector. However, we do not expect this to happen and see a significant ruble liquidity surplus forming over the coming week as the new reserves averaging period gets underway. Against this backdrop, the RUONIA rate will likely rise, but probably only to around 4.1%, not to 4.20-4.25%, where it was for most of the last reserves averaging period, which was quite high, mainly due to liquidity flows related to OFZ placements.> OFZs and rates: Finance Ministry may be seeking to exceed the 4Q20 OFZ issuance plan by R0.2 trln. Last week, ruble rates experienced a period of elevated volatility. They jumped 5-10 ahead of the US election, before dropping on Thursday by 25-30 bps amid rising demand for risk assets. Today, the Finance Ministry will offer a floating-rate OFZ issue and a nominal issue (both without limits). The Finance Ministry's intention to place floaters today is probably a sign that it is going to exceed its plan for 4Q20.