Liquidity declines on tax payments

Обзор облигаций 02.04.2015 Banking sector liquidity declined significantly on the final day of March after the last day of month-end tax payments on Monday. Banks' correspondent accounts with the NBU slid only UAH0.16bn to UAH25.32bn while total CDs outstanding fell UAH4.00bn to UAH14.28bn. As total local currency debt repayments scheduled for the next 30 days rose UAH0.66bn to UAH16.58bn, broader banking sector liquidity fell UAH6.51bn to UAH56.19bn. KyivPrime interest rates rose significantly: the KyivPrime ON interest rate rose 140bp to 24.15% while the KyivPrime 1M interest rate rose a less significant 43bp to 28.10%. Investment implications: The NBU did not issue a large volume of ON loans this Monday, but banks significantly decreased the volume of ON CDs in their portfolios, causing a dramatic decline in total CDs outstanding. Today, liquidity could recover slightly, but the results will most likely appear tomorrow as the MoF prefers to retain funds in the treasury accounts at the beginning of the month to show a high level of available funds in its statistics. As expenditures should begin the following day, these cash-flows could be seen in today's NBU statistics on liquidity. Only yesterday's repayment of UAH0.50bn of loans to the NBU will have a negative impact on liquidity.