Rates Weekly - October 27, 2020

> Ruble liquidity: Interbank O/N rates remain stable last week, but could decline next week on liquidity inflows. Since last Tuesday, the RUONIA rate was stable at slightly below the key rate. Banks kept a decent liquidity surplus of about R600-700 bln, but rates were unaffected, as banks expected large tax-related outflows, which happened yesterday. Today, the CBR tried to absorb R1.4 trln via weekly deposits, but banks placed only R1.1 trln, slightly less than last week. This is probably due to the fact that tomorrow significant liquidity outflows related to budget will take place, which will soak up the liquidity surplus, while the RUONIA rate should remain near the key rate. However, early next week we would expect a R300-400 bln liquidity surplus to reemerge and the RUONIA rate to drop to about 4.15%. In the second week of November, it looks set to drop further, to 4% and temporarily even below that mark, as the current reserves averaging period will be nearing its end (November 10) and demand for liquidity should steadily fall.> OFZs and rates: This week's OFZ placements likely to drop to R300-320 bln. At tomorrow's OFZ auctions, two new issues will be offered: the 10y nominal OFZ 26235 (March 2031) with a R30 bln limit and the 9y floating-rate OFZ 29019 (July 2029) without a limit. The main event in the rates market over the last week was Friday's CBR meeting, where the key rate was left unchanged at 4.25%. We believe the bank will deliver a 25 bp cut to 4.00% at its next meeting on December 18.