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FINEX WEEK

  1. The KASB review
  2. Finex week

Updated on Dec 13, 1999

The money market eased off considerably as the week came to a close. Rates were relatively firm till mid week and trades were witnessed at 12.95%. The withdrawal of funds prior to the start of the month of Ramazan coupled with aggressive investment interest in the new Prize Bonds introduced by the government, led the system to register a net shortage. The spike in the discounting figure was also serious from a low of Rs.800.0mln to a high of Rs. 15.0 to Rs. 16.0bln (estimates).

However, the market eased after midweek as the SBP attempted to put a reign on the liquidity crisis injected liquidity into the system from two fronts, FX Swaps and the OMO. The Rs. 20 bln injection via 2-way OMO (Rs. 13.0 bln at 10.00% in 1 month and Rs. 7.0 bln in 1 week at 10.75%) on Thursday (09/12/99) in addition to banks availing the swap facility offered by the State Bank (from 08/12/99 to 14/01/2000) brought in a further estimated Rs. 800.0 mln into the market. The overnight close this week was in the band of 6.00% to 7.00%, down from a high of 12.95% on Wednesday. However, the fall in term repo levels was far more dramatic as the 1 month quote came off by over 150 bps to close the week in vicinity of 10.25%, while the 3 month quote collapsed to into the 9.00% to 9.25% range. Decent trades were also witnessed within the 10.20% to 10.50% for 9 month to 11 month maturities. The recent hints by the MoF towards an imminent cut in interest rates by approximately 2.00%, gave rise to fears of an impending crash and banks opted to lock in their funds in 6 month to 1 year maturities. Offers of 6 month were quoted at 9.75% against potential bidding interest at 9.50%, towards the week's close.

The State Bank although having acted prudently in alleviating the liquidity crisis this month have made matters much worse for the month of January 2000. The injection of Rs. 13.0 bln in the 1 month tenor will mature in January coupled with outflows via the State Bank's swap facility, is estimated to lead to a net outflow of Rs. 6.0 bln to Rs. 6.50 bln from the system during next month. Most traders are however still awaiting the MoF's announcement scheduled for the 15th of December to have a clear view of the medium to long term direction of interest rates. In the mean time, we expect an active investment interest to continue in comparatively longer periods as banks holding decent funds aim towards a hedge, should the MoF makes good on the current speculation of a fall in rates, soon.

 

YIELD PROFILE

 

FEDERAL INVESTMENT BONDS

  THIS WEEK 1 WK AGO 1 YR AGO
1 Year 11.25 11.50 12.50%
2 Year 12.25 12.75 12.50%
3 Year 13.00 13.90 13.25%
4 Year 13.25 14.00 14.00%
5 Year 13.75 14.50 14.50%
10 Year 14.25 14.75 15.50%

AUCTIONS
Bid Date Instrument Result Settlement
Dec 01 T-BILL Dec 01 Dec 02
Amount
Asked
Bid
Amount
1 Year
Ago
Rs. 01.7 Bln.

Rs.07.925 Bln.

Rs.01.925 Bln

 

MATURITIES
Instrument Data Amount
T-Bill 02 Dec 750 Mln
T-Bill 05 Dec 200 Mln
T-Bill 16 Dec 1,000Mln
T-Bill 23 Des 950 Mln

 

REPO RATES

 

This Week

1 Wk Ago

1 Yr. Ago

Overnight 04.50 12.90 15.50
1 Week 10.00 11.75 09.00
1 Month 10.25 11.25 07.00
3 Month 09.00 10.70 10.10
6 Month 09.50 10.20 11.25
1 Year 11.25 11.50 N. A.

 

TREASURY BILL RATES
Maturing This Week 1 Wk Ago 1 Yr Ago
1 Month 10.25 12.00 16.00
2 Month 10.00 11.35 08.50
3 Month 09.20 10.80 09.50
4 Month 09.30 10.60 10.35
5 Month 09.50 10.30 10.75