Russian financial market was moderately positive in April

The Russian financial market was moderately positive in April. Most market segments saw price growth amid an increase in global risk appetite, and Russia’s Ministry of Finance placed a record volume of OFZ amid a sustainably high demand from foreign investors and systemically important credit institutions. These are the findings of the latest issue of the Banking Sector Liquidity and Financial Markets commentary.

The market expected the Bank of Russia’s decision to keep the key rate at 7.75% p.a. That said, a press release comment about a possible key rate cut as soon as Q2-Q3 shifted analysts’ expectations of the earliest key rate reduction from December to June-September.

Structural liquidity surplus continued to shrink in April. This was driven by funds outflow on the back of an increase in cash in circulation and large tax payments, and the fact that banks increased their correspondent account balances in the run-up to a long weekend to deliver on required reserves averaging.

Short-term interbank rates in the money market formed near the key rate amid a high supply of funds by banks at Bank of Russia deposit auctions. Interest rate spread in the FX swap and interbank segments shrank slightly. FX liquidity was supported by a current account inflow amid high oil prices.

By April 2019, growth in ruble deposit rates paused, while the US dollar deposit market saw a rate decrease. Depositors’ interest in long-term ruble deposits continued to recover. March 2019 saw a further acceleration of annual growth of the loan portfolio both in the retail and corporate market segments.