NBU supports liquidity

Обзор облигаций 05.05.2015 After about two weeks of providing no support through the end of April, the NBU purchased bonds last Tuesday and issued a large volume of loans to three banks last Wednesday, most likely to cover a portion of outflows. As a result, broader banking sector liquidity declined only UAH0.83bn to UAH53.29bn while banks' correspondent accounts with the NBU rose UAH0.92bn to UAH22.86bn. Total CDs outstanding declined UAH1.10bn to UAH25.42bn and total local currency debt repayments scheduled for the next 30 days slid 0.66bn to UAH5.02bn. KyivPrime interest rates diverged last Thursday: the KyivPrime ON interest rate rose 41bp to 22.33% while the KyivPrime 1M interest rate remained steady at 28.00%. Investment implications: Banks' correspondent accounts with the NBU rose last Thursday, the last business day in April, up UAH0.92bn, after receiving UAH1.10bn of net CD redemptions, UAH0.66bn in debt repayments and UAH1.82bn in NBU loans. However, these significant inflows had little impact on banks' correspondent accounts with the NBU, as funds appear to have been spent on month-end tax payments. Today, the Ukrainian Treasury should publish data on MoF accounts, as NBU data will provide us with last Thursday's cash flows. Most likely, we could see a significant MoF absorption of funds and liquidity decline further, which should reverse very soon.