Russian financial market enjoys stability in March

The Russian financial market was stable in March 2019, with most of its segments having seen no significant price movements. This was associated with a neutral external environment and unchanged attitude to sanction risk, writes the latest issue of the Banking Sector Liquidity and Financial Markets commentary.

The decision made by the Bank of Russia Board of Directors in March was in line with the market’s expectations. The Bank of Russia’s comment regarding the key rate cut in 2019 made market participants and analysts revise the expected key rate path downwards.

In March, the structural liquidity surplus decreased amid funds outflow through the budget channel. The temporary surplus reduction at the end of the month was also facilitated by the fact that banks increased their balances in correspondent accounts with the Bank of Russia as a result of a more even averaging of required reserves. As banks increased their supply of funds at the Bank of Russia deposit auctions against the established limits, the spread between short-term interbank rates and the Bank of Russia key rate shrank.

FX liquidity continued to post a favourable performance, amid a massive inflow in the current account of the balance of payments coupled with moderate fiscal rule-based foreign currency purchases by the Bank of Russia.

In March, some Russian banks, including majors, raised interest rates on ruble deposits. The inflow of funds to household deposits accelerated somewhat amid the ongoing recovery of depositors’ interest in long-term ruble deposits. February saw a further rise in mortgage loan rates while rates in other segments of retail and corporate lending markets showed mixed dynamics. Both retail and corporate lending markets registered a slight increase in annual growth of loan portfolio.