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ICU Research: Liquidity slight decline

November 30, 2012

Taras Kotovych, Fixed-income analyst, Investment Capital Ukraine:

Although the NBU issued UAH0.40bn of inflows on Wednesday, liquidity declined yesterday morning despite this support. Banks' correspondent accounts with the NBU slid UAH0.32bn to UAH20.98bn and total debt repayments scheduled for the next 30 days declined UAH0.58bn, causing broader banking sector liquidity to fall UAH0.90bn to UAH28.59bn. Total NBU CDs outstanding remained steady at UAH0.02bn. KyivPrime interest rates slightly diverged yesterday: the KyivPrime ON interest rate rose 340bp to 7.40% while the KyivPrime 1M interest rate slid 73bp to 33.60%.
Investment implications: Yesterday's movements in liquidity were light, caused by insignificant cash-flow transactions on Tuesday. The NBU purchased UAH0.30bn of government bonds and issued of UAH0.03bn of repos and UAH0.10bn of ON loans on Wednesday, while banks repaid UAH0.03bn of ON loans received on Tuesday. The MoF repaid UAH0.58bn in debt interest repayments, including UAH0.18bn in FX (US$22.07m), while banks paid more than UAH0.50bn for the new government bonds purchased on Wednesday. As state budget inflows outpaced outflows, the decline in liquidity could be also caused by monthly tax payments. Today, liquidity should decline more than yesterday mostly due to tax payments, but we could see the main pressure of tax payments on liquidity due on the last day of tax payments in November if the NBU did not make inflows to keep liquidity stable.