Banks continued to increase cash, which has a negative impact on liquidity in the banking system. Last Thursday, outflow via cash amounted to UAH1.11bn. However, this outflow was compensation by additional expenditures from budget, resulting in an insufficient increase in liquidity. The net impact of non-monetary operations amounted to UAH0.05bn, which supported liquidity with an increase to UAH98.30bn.
The total amount of CDs outstanding was up UAH0.14bn to UAH55.26bn with a slight preference to 14-day maturities. But funds invested in CDs came from banks' correspondent accounts, which slid UAH0.09bn to UAH43.04bn.
Investment implications: Since the beginning of the year, liquidity declined 12.21%, but compared with July 2016, liquidity slid by a mere 0.5%. Last year, liquidity declined during the summer. During autumn, it remained at around UAH70-80bn until December, when the Treasury increased budget expenditures, and liquidity was up to above UAH100bn. So, now we could have a similar situation, with lower liquidity during 2H17. A new, month-end tax-payments period will start at the end of next week, which should have a negative impact on liquidity and increase the liquidity decline. Therefore, the current stabilisation of liquidity could be short-lived. At the same time, a decline in liquidity should not cause changes in the cost of funding.
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