Banks increase investments in 14-day CDs

Banks increase investments in 14-day CDs



7 жовтня 2015 года
ICU

Following negative market anticipations that the NBU would decrease CD interest rates after it lowered the key rate to 22% on September 25, the NBU kept them at the 18-20% band for CDs up to 14-days maturity. Longer maturity CDs have been sold only once since the key rate was reduced, namely 30-day and 89-day CDs at between 20% and 22%, while banks significantly increased their purchasing of 14-day CDs in anticipation of lower rates. As a result, they increased their current total CDs outstanding to UAH30.10bn as of the beginning of yesterday. With the results of Monday's tender, total CDs outstanding rose UAH1.54bn to UAH57.11bn yesterday while banks' correspondent accounts with the NBU slid UAH0.93bn to UAH22.50bn. Banking sector liquidity increased UAH0.61bn to UAH79.61bn.

Investment implications: Fear of lower interest rates forced banks to prefer longer CDs over ON CDs, increasing total CDs outstanding to an historic record high of UAH57.11bn. However, nearly half of these CDs are scheduled to be repaid this week. We expect a decline in banks' correspondent accounts, usually seen during the first week of each month.

Источник: ICU

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