This Wednesday, banks' correspondent accounts balance with the NBU fell UAH4.73bn to UAH47.06bn, most of which were invested in new CDs. Total CDs outstanding was up UAH3.48bn to UAH57.22bn, due to an increase in 14-day CDs. Total banking sector liquidity slid a mere UAH1.24bn to UAH104.28bn.
The decline was caused by autonomous non-monetary operations, mainly by the Treasury. Outflows to Treasury accounts amounted to UAH1.88bn and were only partially offset by the positive impact of changes in cash. The NBU had no additional monetary operations.
Investment implications: The Treasury absorbed some funds via month-end tax payments. Excluding VAT refunds or additional expenditures, the outflow was not offset. Principal and interest repayments were not able to offset outflows, as half of them were to the NBU, and a quarter of the repayments was refinanced at the auction. Liquidity should stay above UAH100bn and decline slightly through the end of this week, as banks invested additional funds in 14-day CDs with redemption ahead of quarterly tax payments in August.
ICU is an asset management and investmnet banking company.