Translated material
Taxes hit liquidity
Another surge in demand in the money market
At the beginning of this week, the liquidity deficit in the domestic money market increased to a 9-month high. This comes as tax payments end this week. According to experts, the situation should normalize next month, but payments on external debts are due at the end of the year. In addition, the negative situation on the stock market may put pressure on liquidity.The liquidity shortage worsened significantly on Monday. Interbank lending rates reached 8-9% during the day, and for the first time in a long time, the Central Bank was forced to resort to injections of money through the repo mechanism. Yesterday, commercial banks raised more than 192 billion rubles at auctions, and the day before - almost 175 billion rubles.
“Tax payments led to an outflow of funds from ruble correspondent accounts and bank deposits, which caused an increase in short-term ruble interbank lending rates to the level of 5.5-6.5% per annum,” notes Promsvyazbank analyst Oleg Shagov. -- Banks' need for ruble liquidity against the backdrop of an increase in short-term interbank lending rates led to an increase in repo turnover with the Central Bank. The volume attracted by banks on Tuesday was 192.2 billion rubles. According to the results of the direct repo auction, it was a record high since November last year.”
According to experts, the lack of liquidity was facilitated by the fact that payments made were the largest in the last quarter. This included quarterly payments of VAT, mineral extraction tax and income tax. The outflow of liquidity is estimated at 800--900 billion rubles. In addition, the money market was negatively affected by events in the stock market.
As Alexander Razuvaev, head of the market analysis department at Sobinbank, notes, the dynamics of the Russian stock market will inevitably affect the financial position of small commercial banks. “Losses in the stock market could undermine their liquidity amid current refinancing problems,” he notes. “There may be a crisis of confidence in the interbank lending market, an increase in rates and, accordingly, a new fall in the stock market.”
Already on Tuesday, amid a lack of liquidity, there was a decline in quotations in some second-tier ruble securities. In particular, bonds of a number of energy companies, VTB, and Russian Railways fell in price.
According to analysts at Zenit Bank, with the beginning of the new month the situation in the money market should normalize. This should provide support for ruble securities along with demand from management companies placing funds from the housing and communal services fund. “At the same time, we cannot expect a significant improvement in the situation on the debt market in August, because on the other side of the scale is the tense situation on the stock market and the still high volume of new supply of ruble debt,” experts point out.
However, financial regulators do not forget to support their clients with financial resources. The Ministry of Finance yesterday placed 18.3 billion rubles on bank deposits. budget funds. The cut-off rate was determined at the level of the pre-announced minimum rate of 8% per annum. In their applications, banks offered rates in the range of 8--8.2% per annum, the weighted average rate was 8.08% per annum. The term for placing deposits is four weeks. The volume of placement coincided with the total volume of applications received by the organizers. Auctions to place temporarily free budget funds on deposit have been held weekly since April 17 to maintain the liquidity of the banking system in a tense situation in the financial markets.
On Monday, First Deputy Chairman of the Central Bank Alexey Ulyukaev told reporters that the Bank of Russia is satisfied with the liquidity situation, and the fight against inflation remains the priority for the Central Bank. According to him, “there is no liquidity crisis, and the Central Bank, in conditions of increased demand for liquidity, has provided banks with significant amounts of funds through the repo mechanism.” At the same time, Mr. Ulyukaev expects a new local surge in demand for liquidity in October.
“In the fourth quarter, large payments on external debts are coming,” recalls Alexander Golovtsov, head of the analytical research directorate at Uralsib Management Company. - However, the Central Bank and the Ministry of Finance will certainly provide additional liquidity to the market if necessary. At least in anticipation of the first quarterly VAT payment in April, this was done very effectively. However, overnight interbank lending rates may rise at the end of the year from recent abnormally low levels of 4-5% to approximately 8%, or slightly higher than the Central Bank’s repo and pawn loan rates.” According to Mr. Golovtsov, the cost of loans on the foreign market for Russian banks and corporations will likely remain noticeably higher than a year ago, and the possibilities for borrowing volumes, as at the end of last year, will be very modest.
The US Treasury Department and the four largest US banks - Bank of America, Citigroup, JP Morgan Chase and Wells Fargo - intend to issue covered bonds in order to support the credit market. The Ministry of Finance, reports REUTERS , has published recommendations on how to use this financial instrument, which is quite widespread in Europe, but has not yet found wide recognition in the United States. “The main condition for improving the situation in the American economy is changes in housing financing and a correction in the housing market. We would not do this if mortgage financing were not possible, and this is an attractive source of financing for the mortgage industry,” said US Treasury Secretary Henry Paulson. Traditionally, the US housing market has been supported by securities: US bonds, backed by loans from mortgage borrowers, were sold around the world. However, last year, due to non-repayment of debts by unreliable borrowers, the flow of funds into the mortgage sector stopped. Unlike mortgage bonds, which place all risks on the shoulders of investors, secured mortgage bonds will remain in value even if the mortgage defaults: the banks that issued such bonds will continue to fulfill their obligations. “I think the issue will be undertaken very soon. We're not 100 percent confident that bonds will be widely adopted, but they are an innovative tool and we think they're quite promising," Mr. Paulson said.