Rates Weekly - November 3, 2020

> Ruble liquidity: O/N rates finally start to decline. RUONIA has remained fairly elevated near the key rate over the past week due to tax payments and the placement of more than R400 bln in OFZs, which have neutralized the liquidity surplus. But the Finance Ministry has increased spending, and on Friday the Federal Treasury managed to place the proceeds from the OFZ sale via repo and deposits. As a result, a liquidity surplus reemerged late last week and expanded to R460 bln yesterday, which was enough to finally push RUONIA to 4%. Over the next week, we expect an inflow of liquidity given seasonal budget spending and the Federal Treasury deposits. We expect the liquidity surplus to climb to more than R1 trln next week, which would likely push RUONIA to 3.8%; the CBR is likely to conduct fine-tuning deposit auctions to prevent it from sliding even further. Against this backdrop, demand for CBR monthly repo appears set to wane next week, especially if the Finance Ministry calls an end to its aggressive OFZ placements, as it has almost met its 4Q20 borrowing target.> OFZs and rates: Period of rising ruble rates is probably over for now. In the event of a decisive victory in the US election for Joe Biden, we would expect OFZ yields longer than 10y to slide 10-15 bps over the week and 1-10y rates to ease 5-10 bps. Another factor supporting OFZ yields longer than 10y is the strong OFZ auction results last week and today.