(Bloomberg) – The situation with liquidity in the banking sector of the Russian Federation, the deficit of which has renewed a long-term peak, will soon improve amid falling demand for cash and budget inflows, market participants say.
“In the coming months, the situation will improve, and the banking system will return to a structural liquidity surplus,” wrote the chief economist of Sovcombank, Kirill Sokolov, by e-mail. “As the situation with the pandemic is brought under control, the demand for cash from citizens and businesses will decline. Also, budgetary expenditures and revenues will be leveled, and liquidity will return to banks. “
The growth in demand for cash was one of the factors behind the outflow of funds from banks last year against the backdrop of the coronavirus pandemic, but from the beginning of 2021, liquidity through this channel has already begun to return to banks. From the data of the Bank of Russia, it follows that since the beginning of the year its inflow has exceeded 200 billion rubles and should continue in the coming months, treasurers expect.
“In the future, we expect a gradual increase in liquidity due to the further return of cash to the system and due to the resumption of operations of the Federal Treasury to provide liquidity,” Rinat Kutuev, Director of the Treasury of PJSC Bank Saint Petersburg, wrote by e-mail.
In January, the outflow of liquidity was exacerbated by the seasonally surplus of the federal budget and the lack of funds from the RF Treasury for repo and deposit operations, which were resumed only at the end of last week. At the same time, overnight auctions are still not held. Against this background, one-day rates are kept above the key level almost all the time since the beginning of the year.
According to Kutuev, the banking sector uses interbank lending instruments, market repo and repo with the Bank of Russia to replace Treasury funds. Banks expect high demand for CBR long repo auctions on February 15.
VTB Group expects that CBR long-term repo auctions will remain in demand given “the market level of auction rates and the substantial volume of federal loan bonds accumulated by banks in the second half of last year,” but no significant increase in demand is expected in February, the press service said in a response to a Bloomberg request. At the same time, the bank predicts a return of overnight rates in February “to the area of average statistical values for many months” against the background of an increase in the volume of placement by the Treasury.
The demand for ruble liquidity will remain high in the near future, and interest in the February long-term repo auctions will be great, JSC Rosselkhozbank predicts.
“The absence of overnight repo auctions of the RF Treasury is currently partially offset by other placement instruments, including repo transactions for terms of more than 30 days,” the RSHB press service said in response to Bloomberg’s inquiry. “Such a shift imposes special requirements on the medium-term planning of liquidity indicators, and, in general, will contribute to the stabilization of rates during these periods with a simultaneous increase in the volatility of overnight rates.”
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