Liquidity down as funds are reallocated

Обзор облигаций 24.04.2015 Following Wednesday's UAH1.52bn in local currency debt repayments, total local currency debt repayments scheduled for the next 30 days fell to UAH9.49bn, causing broader banking sector liquidity to decline a slight UAH1.24bn to UAH60.49bn yesterday. While these funds quite likely were received for the most part by the NBU, banks' correspondent accounts with the NBU slid UAH0.54bn to UAH26.29bn while total CDs outstanding rose UAH0.82bn to UAH24.72bn. KyivPrime interest rates slightly diverged: the KyivPrime ON interest rate rose 17bp to 21.80% while the KyivPrime 1M interest rate slid 30bp to 27.70%. Investment implications: As the NBU received nearly all of the debt repayments on Wednesday, banks increased their CD portfolio by only UAH0.82bn, likely using funds from debt repayments and accounts at the NBU. As the NBU has issued no loans to banks since last Wednesday, it appears that the banking system and FX market have reached a comfortable balance. As month-end tax payments will continue over the next week, the increased pressure on liquidity should cause it to decline through the end of the month.