Liquidity recovers slightly

Обзор облигаций 07.05.2015 As expected, liquidity has begun to recover since the beginning of the month. Yesterday's indicators show a slight increase in broader liquidity and significant absorption of extra liquidity made by the NBU. Banks purchased newly issued CDs on Tuesday, increasing total CDs outstanding by UAH2.35bn to UAH24.81bn, and repaid about UAH1.04bn of ON loans to the NBU. Outflows from banks' correspondent accounts with the NBU resulted in a UAH1.75bn decline to UAH21.46bn. As total local currency debt repayments scheduled for the next 30 days remained steady at UAH6.25bn, broader banking sector liquidity rose a mere UAH0.61bn to UAH52.52bn. The decline in KyivPrime interest rates reflected the stabilization of liquidity: the KyivPrime ON rate fell 125bp to 21.00% while the KyivPrime 1M rate slid 5bp to 27.75%. Investment implications: The NBU absorbed extra liquidity from banks as ON loans and CD redemptions last week sustained banks' correspondent accounts above UAH20.0bn. Yesterday's debt repayments, again mostly received by the NBU, had little impact on banks' accounts. Although we anticipate that liquidity will continue to recover, we also expect the NBU to continue to absorb extra liquidity by selling CDs.