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ICU Research: Liquidity slightly recovers

July 07, 2017 | Cbonds

On Wednesday, banking-sector liquidity was up slightly by UAH0.34bn to UAH103.76bn despite UAH2.04bn of inflow from the Treasury. The impact of non-monetary operations amounted to UAH1.26bn, including inflow from the Treasury, which compensated for large outflows via cash and other operations. But this positive impact was cut by outflows caused by the NBU via FX auction and FX purchase, which absorbed UAH0.91bn.

Banks' correspondent accounts with the NBU slid UAH0.91bn to UAH38.04bn, while total CDs outstanding were up UAH1.26bn. Banks showed a preference for 14-day CDs, buying UAH2.78bn, and decreased ON CDs by UAH1.53bn.

Investment implications: NBU had to satisfy a portion of demand for FX on Wednesday, and absorbed some local-currency liquidity. So, the liquidity increase was insufficient. Banks increased purchases of 14-day CDs instead of ON maturities yesterday, because they anticipated the NBU would decrease the key rate. However, the key rate remained unchanged, so we expect banks to increase ON CDs. Therefore, the Treasury could keep its expenditures above revenues, and support a liquidity recovery, by supporting banks' purchases of 14-day CDs.

Company: NBU

Full company nameThe National Bank of Ukraine
Country of riskUkraine

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