Rates Weekly - September 22, 2020

> Ruble liquidity: O/N rates stay surprisingly high, but ample liquidity should push them lower next week. Last week, the RUONIA unexpectedly rose to a quite high 4.24%, despite there having been no liquidity outflows and actually a liquidity surplus. Banks' demand for liquidity was quite high. It was probably the case that some banks wanted to ramp-up reserves in advance of large tax payments at the end of this week or needed higher reserves for other regulatory ratios. This week, meanwhile, the Ruonia started to decrease and reached a more normal level of 4.16%, while demand for repo from the Federal Treasury also decreased. There is currently a R500 bln liquidity surplus, which will grow to R1 trln owing to the fact that the CBR will absorb much less liquidity this week than last week. Still, there will be a R1 trln outflow related to tax payments, so the RUONIA will likely stay near 4.2% this week. However, early next week there will be a decent liquidity surplus, partially due to traditionally high budget spending at the end of the month. As a result, early next week we expect O/N rates to drop to 4% and likely lower until the end of the reserves averaging period.> OFZs and rates: Finance Ministry may be able to place R150-170 bln at tomorrow's OFZ auction. Tomorrow, the Finance Ministry will auction off the new 8y floating-rate OFZ 29015 (October 2028) without a limit and R20 bln of the 5y nominal OFZ 26234 (July 2025). We expect it to place around R150 bln in the floater. However, since demand for nominal paper remains subdued, a relatively generous premium may be needed in order to place the 5y nominal issue in full.