Continued non-residents’ demand for OFZ and start of dividend payment period supported Russian financial market

In May, the situation in the Russian financial market remained stable overall. Foreign investors continued extensive OFZ purchases, and their investments hit an all-time high. According to the latest issue of Bank of Russia commentary 'Banking Sector Liquidity and Financial Markets', the stock market was supported by the start of the dividend period as a number of major Russian companies and banks announced increased payments.

Market participants started to expect a faster easing of the Bank of Russia’s monetary policy following the slowdown in inflation and statement by Bank of Russia representatives.

The structural liquidity surplus rose in May. This resulted from the fact that banks decreased correspondent account balances at the month-end and expanded funds supply at the deposit auction, and investments in Bank of Russia coupon bonds grew.

Short-term interbank rates in the money market continued to form near the Bank of Russia key rate amid a high supply of funds at Bank of Russia deposit auctions and high rates in the FX swap segment. The interest rate spread in the FX swap and interbank segments expanded somewhat as non-residents reduced supply of ruble liquidity.

In April, the deposit market saw a rate reduction, while the credit market witnessed a slowdown in interest rate growth. In the corporate segment of the credit market, participants’ activity remains moderate and the process of substituting FX loans with ruble-denominated loans is ongoing. In the retail market segment, lending activity is gaining momentum largely on the back of consumer lending.