Yuan will be smoothed by swap

The Central Bank is launching a new financial instrument – currency swap operations with the yuan. This is a logical replacement for swaps with “unfriendly” currencies, which the Central Bank does not carry out after the imposition of sanctions. The tool should reduce the rush demand for the Chinese currency, as well as smooth out bursts of volatility in the market.

From January 19, the Central Bank will begin to conclude one-day deals with banks to provide yuan for rubles, follows from the message of the regulator. Due to this, the Central Bank is going to limit the volatility of money market rates in case of imbalances. At the same time, the significance of the new instrument is growing due to the “active expansion of direct settlements” in national currencies between companies from the Russian Federation and China. In addition, the tool will allow you to manage the currency position of banks. For example, last year the foreign exchange positions of banks (the ratio of assets and liabilities in foreign currency, in case of equality – it is considered closed, in case of a mismatch – open) against the background of various restrictions and sanctions, they diverged greatly, Kommersant’s interlocutors note. Against this background, the Central Bank loosened control over compliance with the limits of the open foreign exchange position in US dollars and euros.

Evgeny Nadorshin, Chief Economist at PF Kapital, notes that now he cannot effectively work with the dollar swap with the entire Central Bank market due to sanctions. In segments of transactions with a number of currencies, for example, the dollar and the euro, there is not even the appearance of a single market. Because of this, the traditionally used currency swaps do not allow meeting the needs of the entire market, a replacement is needed and the yuan is quite a suitable currency for this, he believes. “Since the Bank of Russia was able to resume foreign exchange interventions (since last week, the Central Bank has been selling yuan for 3 billion rubles, see “Kommersant” dated January 13), it is obvious that the Chinese authorities have met halfway and correspondent banks from the PRC allow transactions in yuan,” the expert adds.

As follows from Central Bank messageswhen calculating the swap difference, the rate will be calculated based on the Shanghai Interbank Rate (Overnight SHIBOR) and the key rate of the Central Bank.

Based on the presented formula and rates as of January 17, it follows that the swap difference will be 2.15% per annum.

At the same time, market rates on swap transactions with Chinese currency reached 4.9% per annum, said Philip Agrachev, head of the department for client operations in the financial markets of Sovcombank. The rate is higher than the usual values ​​for the yuan money market, but the Central Bank has previously set comparable quotes for swap operations with US dollars, Soyuz bank notes. “Given that the yuan market is overheated, the Central Bank removes the hype with a new product (with a significant volume), and the yuan borrowing rates should fall, since the proposed swap rate from the Central Bank (if we say that we sell rubles and receive yuan) is very attractive for banks,” according to Novikombank.

The transaction limit will be 10 billion CNY (in terms of rubles at the exchange rate – about 100 billion rubles). At the same time, the daily volume of transactions on the Moscow Exchange has been CNY 20–30 billion for more than six months.

“Until now, Chinese banks have had a significant impact on liquidity in yuan, but they have their own seasonality of operations,” says Mikhail Matovnikov, chief analyst at Sberbank.

According to him, “the new instrument of the Central Bank will reduce the negative effects of volatility, but its volume should not be comparable to the needs of the market, it is primarily a tool to smooth out fluctuations.”

In this case, the regulator ensures market stability, Philipp Agrachev also believes, since banks still do not have “long liabilities in yuan, and financing long assets with short swaps can lead to a local lack of liquidity.” In such a situation, banks will be able to attract Chinese currency from the Central Bank. At the same time, market participants expect an increase in the volume of transactions. “The current higher rates in the yuan swap and repo market testify to the presence of market demand for such a service from many large banks,” Soyuz bank says. However, such transactions will be in high demand if the money market situation worsens or if there is a shortage of yuan during periods of ruble weakening, Vladimir Evstifeev, head of the analytical department of Zenit Bank, believes.

Olga Sherunkova, Vitaly Gaidaev