Rates Weekly - October 13, 2020

> Ruble liquidity: Liquidity injection via CBR's repo to pressure O/N rates. Over the last week there was a moderate liquidity surplus of about R200 bln, but demand for liquidity remained high and the RUONIA was elevated at about 4.2%. In advance of significant liquidity outflows, including potentially related to OFZ issuance, banks borrowed R620 bln via the CBR's repo auctions. Fearing potential liquidity imbalances, the CBR had increased limits on the auctions. This has resulted in a significant R1 trln liquidity surplus, which could remain in place over the next week, if the Finance Ministry keeps actively disbursing the funds it receives from the record-high OFZ placements. As a result, the RUONIA could drop to 4.1% over the next week and even below 4% in late October/early November, when tax payments will be done and the funds collected via it will be spent.> OFZs and rates: We see R300-350 bln of OFZs being placed at tomorrow's auctions. The nominal issue on offer tomorrow, the 15y OFZ 26233 (July 2035), is still illiquid and is not included in global indexes, so foreign demand should not be high, while the paper's high duration makes it less attractive for local banks. We see R20-30 bln being placed. Meanwhile, demand for the floater to be offered tomorrow, the new 12y OFZ 29017 (August 2032), should be much higher. Last week's floater auction proved that local banks could buy floaters in bulk, and we expect around R300 bln to be placed.