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. Last Updated: 07/27/2016

Interbank Loan Rates Touch 10%

Overnight rates on Russia's interbank money market touched 10 percent Wednesday, their highest since mid-2005, amid a deepening liquidity squeeze that has led some banks to curb lending.

"Big ruble liquidity providers seem to have pulled back from giving money to other banks, so we are having our own version of the credit crunch here," the head of treasury at one commercial bank in Moscow said.

According to indicative quotes, overnight money was from 9 percent to 10 percent even after the Central Bank injected 56 billion rubles ($2.24 billion) of funds into the banking system at 6.06 percent via a one-day repo auction.

"If overnight rates for first-tier banks have reached 9 percent to 10 percent, for second- and third-tier banks they have gone up to 15 percent to 20 percent," said Mikahil Zak at Gazprombank, warning that conditions could tighten further without radical policy steps.

Liquidity has dried up since the U.S. subprime crisis hit, with a weak dollar making oil firms reluctant to repatriate export revenues and Russian borrowers finding it hard to access debt markets.

"The situation with liquidity seems to be the tightest since the beginning of the year," said Nikolai Podguzov, fixed-income analyst at Renaissance Capital.

Regular monthly tax payments are also draining cash from the market, but Podguzov said he expected money market rates to revert to levels near the repo rate in October and November.

"I wouldn't say the situation is close to crisis. It seems to me that the monetary authorities are doing their best to keep the liquidity situation adequate," Podguzov said.