Overnight money market rates hold close to the key rate in March

The end-of-quarter effect failed to manifest itself in March: the last day of the month did not see a sharp decline in ruble rates on FX swaps due to the comfortable situation with FX liquidity, notes the thirteenth issue of the commentary entitled ‘Banking Sector Liquidity and Financial Markets’.

Structural liquidity surplus did not change considerably in March. Liquidity outflow caused by major tax payments was offset by budget expenditures and the placement of funds in bank deposits by Russian constituent territories.

The ruble strengthened despite a drop in oil prices. The Russian currency was backed up by sizeable sales of FX revenues from exports, depreciation of the US dollar and a strong demand for Russian OFZ from non-residents.

Comments about the possibility of an earlier key rate cut with its further reduction by 0.25 pp given in March by the Bank of Russia were taken by market participants as a signal of a smoother rate decrease.