March sees accelerated influx of foreign capital to OFZ market

March saw the highest growth in investments by non-residents in OFZs recorded in the last 18 months, with growth in investments in Q1 exceeding the outflow of non-residents' funds from the OFZ market from August to December 2018. These figures are reported in the latest issue of the Financial Market Risks Review.

There was an increase in non-resident long ruble positions in the FX swap market as part of the carry trade strategy. In addition, the open position in the market grew by almost 10 billion US dollars. Foreign currency in the FX swap market was mostly supplied by Russian systemically important credit institutions in response to the significant increase in FX balances of customer accounts.

Given the growth in highly liquid assets in the Russian financial market in recent years, the Bank of Russia increased the charge for the right to use the irrevocable credit line (ICL) arranged since 1 May 2019 from 0.15 to 0.5% per year in order to reduce banks' dependence on the ICL. This increased charge for the right to use the ICL will incentivise banks to comply with the liquidity coverage ratio by generating a portfolio of highly liquid assets.