Following Tuesday's cash flows and CD auction, the structure of liquidity changed significantly while total liquidity remained nearly unchanged. This should be temporary. A significant volume of CDs was reallocated to banks' accounts as CDs outstanding declined UAH12.04bn to UAH58.67bn and banks' correspondent accounts with the NBU rose UAH10.82bn to UAH49.55bn. An additional UAH1.38bn was absorbed by the NBU via an FX auction as the impact of Treasury operations was also negative.
Investment implications: Liquidity remains volatile and under the negative impact of Treasury and NBU operations, causing it to decline. After the FX market stabilizes, the NBU should start to purchase FX into reserves, providing additional liquidity. The Treasury should also resume normal budget expenditures without fund accumulations, causing liquidity to stabilize. The recent reallocation of funds to banks' accounts could be reversed and funds could be invested in new CDs through the end of this week unless they are used for NBU loan redemptions.
ICU is an asset management and investmnet banking company.