Liquidity declines without inflows

Обзор облигаций 28.01.2015 As the NBU did not purchase the bonds sold at Monday's unscheduled primary auction, liquidity declined yesterday. Banks' correspondent accounts with the NBU fell UAH1.17bn to UAH30.51bn yesterday and the NBU decreased total CDs outstanding by UAH1.38bn to UAH24.07bn. As total local currency debt repayments scheduled for the next 30 days rose UAH0.50bn to UAH8.17bn, broader banking sector liquidity declined UAH2.05bn to UAH62.75bn. KyivPrime interest rates slightly declined yesterday: the KyivPrime ON interest rate slid 13bp to 11.25% while the KyivPrime 1M interest rate was down 25bp to 18.25%. Investment implications: By not covering Monday's outflows, the NBU allowed liquidity to decline slightly. Although month-end tax payments contributed as well, the decline caused no significant changes in banking system sustainability. If the NBU purchased no bonds yesterday, liquidity could fall further today.