Taras Kotovych, Fixed-income analyst, Investment Capital Ukraine:
On Monday, total FX turnover significantly rose to US2.67bn and could be the main reason for liquidity falling, as banks' correspondent accounts with the NBU fell UAH3.52bn to UAH17.40bn yesterday morning.
KyivPrime interest rates immediately rose yesterday: the KyivPrime ON interest rate rose 1,887bp to 34.67% while the KyivPrime 1M interest rate rose 340bp to 40.0%.
Investment implications: This Monday, banks most likely started to buy FX for Naftogaz to collect funds for payment to Gazprom for natural gas imported in October. These deals could be the main reason for FX market turnover increasing and liquidity falling. Yesterday, the MoF appears to have sold bonds for Naftogaz's share capital increase. If these bond purchases were not supported by the NBU, we could see liquidity falling. At the same time, as these funds could have been transferred to Naftogaz immediately yesterday, these deals would not have an impact on liquidity per the indicators published by the NBU today.