ICU Research: Liquidity stabilizing, declining less dramatically

September 12, 2017 - Cbonds

 

Last Friday, the Treasury collected a less significant amount than it received in budget revenues. Most likely, higher budget expenditures resulted in the Treasury causing liquidity to offset much of the outflow by exchanging reserves into cash. The net impact of non-monetary operations was a UAH0.75bn increase, but it could not support liquidity to a full recovery. The NBU absorbed UAH0.52bn via FX purchases last Friday, causing liquidity to decline a slight UAH0.25bn to UAH79.13bn, the lowest level of the year.

Banks mostly reallocated funds from reserves into CDs with an additional UAH1.69bn in ON CDs and purchased UAH1.97bn of 14-day CDs. With an increase of CDs outstanding of UAH3.66bn to UAH36.50bn, the banks' correspondent account balance with the NBU fell UAH3.92bn to UAH42.63bn.

Investment implications: Fund inflows from the Treasury and additional CD purchases could signal that liquidity is stabilizing and could recover slightly. At the same time, we should not anticipate a significant change in liquidity as the current level of liquidity is routine for September for the third consecutive year. This is likely to decrease pressure on the exchange rate which could cause an increase in budget expenditures.
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