Rates Weekly - October 5, 2021. No Offer of Nominal OFZs at Auctions for Second Straight Week

> Ruble liquidity: Liquidity to remain balanced, O/N rates steady at end of reserves averaging period. Last week, O/N interbank rates gradually declined from levels around the key rate at 6.75%, where they had traded following tax-related liquidity outflows, to about 6.40%, as banks have accrued around R800 bln of excess liquidity on their correspondent accounts at the CBR. Today, the CBR conducted its 1w deposit auction with a limit of R1.25 trln, R0.5 trln higher than last week, while banks' demand came in at a significant R1.7 trln. It seems that the CBR decided not to absorb so much liquidity, given that R400 bln of Federal Treasury O/N repo was redeemed today and not rolled over. Against this backdrop, over the next five working days, which will be the last in the current reserves averaging period, we would expect banks' correspondent accounts at the CBR to hover around R2.7 trln, only slightly above the required level. Thus, liquidity looks set to be rather balanced, and O/N rates could even push a little higher over the next week, to 6.50%. > OFZs and rates: No offer of nominal OFZs for second straight week. The Finance Ministry decided to stick to its cautious primary market strategy this week too, and tomorrow only R10.1 bln of the 12y CPI-linked OFZ 52004 (March 2032) will be offered up. Thus, there will be no supply of nominal OFZs for the second straight week, which should help to soothe the market. We think the amount will be placed in full - the previous auction for the linker in September was cancelled due to technical issues, so there should be some unsatisfied demand for the bond. In addition, weekly inflation surprised on the upside, which might prompt some reallocation out of nominals by local accounts.