Demand for refinancing in CBR is decreasing

RUSSIA ECONOMICS - In Brief 15 Feb 2021 by Alexander Kudrin
Today CBR has conducted the placement of 1-month and 1-year REPO loans. Banks raised R50 bln in the first category and expressed no interest in borrowing money for a longer period of time. As a result, the total amount of placement was the minimum since October 2020, when banks received R620 bln in similar loans. As a reminder, this facility was actively used by them to finance the purchase of floating-rate OFZ in Q4, 2020. Besides that, demand for refinancing in CBR was supported by general deteriorating liquidity on the money market. The “structural surplus” has been moving down during last four months, from R1.5 trln to the “deficit”, equal to R1 trln at the end of January.Ruble liquidity started to improve in the beginning of the year. The budget is still running a deficit, while the Finance Ministry decreased the amount of its borrowing (mainly because of the lack of demand at appropriate levels). In addition, due to the fiscal rule, authorities had to start purchasing hard currency on the back of relatively high oil prices. The latter also helps to increase the supply of Ruble liquidity. As a result, the RUONIA interest rate has moved below the key rate level (4.25%) and the demand for loans from the CBR has also contracted. Ruble liquidity is likely to improve further in the future, which may support the demand for OFZs from the side of local investors.Evgeny GavrilenkovAlexander Kudrin

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