Liquidity down despite inflows

Обзор облигаций 23.03.2015 Prior the month-end tax flows, liquidity declined significantly as broader banking sector liquidity fell UAH3.04bn to UAH60.34bn last Friday. Banks' correspondent accounts with the NBU were down a mere UAH0.76bn while total CDs outstanding fell UAH2.28bn to UAH19.56bn that day. At the same time, total local currency debt repayments scheduled for the next 30 days remained steady. KyivPrime interest rates slightly diverged: the KyivPrime ON interest rate declined 32bp to 22.00% while the KyivPrime 1M interest rate rose 58bp to 27.88%. Investment implications: Although the NBU increased its bond portfolio by UAH2.05bn last Thursday, these funds likely were not for the banking system and had no impact on liquidity. At the same time, the decline in CDs outstanding also did not increase banks' correspondent accounts with the NBU which also declined last Friday. Although this decline could be the result of deals at the FX market, as it was prior to month-end tax payments that started last Friday, this decline should have very negative impact for liquidity and this week liquidity could decline further.