Banks began to experience an acute shortage of foreign currency liquidity, said several treasurers of large banks. “On Friday the market was a real crisis, the currency ended: interest rates on dollars in the money market began to rise sharply”, — said head of dealing Desk Metallinvestbank Sergey Romanchuk. According to him, interest rates on dollars in currency swaps on Friday reached 11% (took the deal at par in rubles). “On Monday, the situation became better, but still the shortage of dollars is saved. In the morning we saw transactions on the interbank market dollar rates of 5% now currency swaps are traded 2.0-2.5%. But it is still significantly higher than those values, which are usually kept on the market”, — said the banker.
In Sberbank CIB has recorded a sharp increase in the turnover of trading segment swaps USD/RUB: transaction volume on Friday rose to $9.1 billion.
“Dollars are scarce, it is evident from the rates on swaps and currency repo rate which has risen from 1.5 to 2.5%,” — said the Director of the Treasury of Sovkombank Vladimir Bykov. He noted that a signal that the market is experiencing a shortage of foreign exchange liquidity is high demand of participants in the auction of the Central Bank. The Bank of Russia on Monday the banks sold $4.2 billion, the maximum rate on the auction repo transactions reached 3% per annum, demand — $5.1 billion “This will only be enough to prolong the current debt to the regulator. The actual demand was higher”, — said Bykov.
The analyst “URALSIB” Irina Lebedeva surprised by the results of the foreign exchange repo auction, the Central Bank. “Usually the level of supply meets the demand. Perhaps there is some intermittent problem with the currency, but how serious it is will become clear when will the balance of payments data for the third quarter. We believe that coming into the country currency, as should suffice to provide the current needs of the banking system,” she says.
“Liquidity has now become easier, the rates return to historical values, but it is unclear what will happen longer. Western banks still do not provide the liquidity of local players,” says the Treasurer of the Bank from the first five. According to him, global players are waiting how the situation will develop with Deutsche Bank. “In Germany today day off, so everyone is waiting for the opening of the stock exchange on Tuesday. All will depend on how to behave quotes Bank”, — said the banker.
The reasons for the deterioration of the situation with foreign exchange liquidity in the banking sector. “The starting point was the deterioration of the conditions of dollar funding in Europe. The ECB declined to increase the supply of dollars, and their value soared — 3-month swap-difference of the EUR/USD fell to -55 b.p that correspond to the state of the market after Brexit vote. At the same time, the cost of short-term funding in dollars reached 3,0%,” — said the head of Analytics of ROSBANK Yuri Tulinov. The cause of the liquidity crisis in Europe were the concerns of bankers on the fate of Deutsche Bank. Bank shares fell in the early European session on Friday to the lowest in several decades. The fall in stock prices followed news that hedge funds began to withdraw their capital from his papers, noted the Financial Times.
“Deutsche Bank was the catalyst for a deficiency of currency, and its cause is that since the beginning of the year, large companies have reduced their foreign currency accounts in banks. And when suddenly the market took foreign exchange liquidity, it just was not” — the analyst of Raiffeisenbank Denis Poryvai. It connects the outflow of currency from the banks with the policy of the Central Bank to de-dollarize. This year, the regulator repeatedly increased deductions in Fund of obligatory reserves (FOR) on foreign currency liabilities. As a result, according to analysts at Sberbank CIB, the foreign exchange deposits in banks declined by $11 billion for the July—August, the volume of Eurobonds in portfolios of banks decreased over the same period to $3 billion.
“However, a sharp increase in demand for dollars appears to be a temporary phenomenon. Overnight rate this week will probably be back to the normal range of 9.3-9.5%”, — says the analyst of Sberbank CIB Tom Levinson.
“It is unclear how long the rates at this level. I think that in the end of the week we know that short-term difficulties with liquidity, or is it a trend,” — said Vladimir Bykov.
Estimated Breaking until the banking system is not enough, not such a significant sum — about $1 billion the total debt of banks to the regulator for all currency pairs is $11 billion. “However, while the regulator is not willing to increase the supply of currency, therefore, at the end of the year when companies will have to pay the external debt, the situation with deficiency of currency may deteriorate,” — says the analyst. This means that banks will have to find dollars from other sources — for example, companies and citizens.
“But for this they will have to raise rates again,” said Romanchuk. According to estimates by Raiffeisenbank, the interest rates on foreign currency deposits may increase by 0.5 p. p. “We see that small banks have begun to raise rates on foreign currency deposits. It is unclear follow any of them big players,” he says. But given the considerable volume of Eurobonds at major banks, they can continue to sell paper into the market to avoid negative carry trade. This may partly stabilize the situation in foreign exchange liquidity.
In the second half of the day Monday the situation began to stabilize, said market participants. “Liquidity has become easier, but Western banks still do not provide the liquidity of local players,” says the Treasurer of the Bank from the top 5. According to him, global players are waiting how the situation will develop with Deutsche Bank. “In Germany today day off, so everyone is waiting for the opening of the stock exchange on Tuesday. All will depend on how to behave quotes Bank”, — said the banker.
On Monday evening the rates on currency swaps have returned to their previous values. “Foreign banks began to open the limits on Russia. You may have a problem with dollars, which we saw on Friday and the first half of Monday was short-lived,” says Board member of “Opening” Konstantin Tserazov.