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Updated on May 22, 2000

Short term rates in the interbank market were on a downward spree throughout the past week. OMO and T-Bill maturities were the reason for overnight rates falling to lows of 1.00% while one week trading was also conducted at 4.50% towards the weekend. Overnight levels rose temporarily on Saturday to 4.00% but fell back to close to 1.50% towards the close. SBP also failed to attract bids for the target amount of Rs. 4.40 billion at the previous cut-off levels with approximately Rs. 2 billion being left in the system due to the mismatch in the maturity and the settlement amount of the auction.

Term levels also eased considerably with the one month quote falling sharply from a high of 6.75% to a low of 5.75%. However towards the end of the week the month levels also rose with bids around 6.10% but offers remained higher than 6.50%. The two and three month tenors continued to be in high demand with banks aiming to cover their positions over the fiscal year end. Two and three month bids were available at 7.20% and 7.00% early in the week but fell back after the announcement of the auction result with trades in two months at 7.00% and three months reported at close to 6.90%. Significant interest was evident in term call deals. Two, three and four month saw the most interest with nominal to moderate trades being reported. Amounts in these tenors were dealt in between 8.25% and 8.50%. As forecasted in our report of last week, the SBP maintained the cut-offs in the T-Bill auction at 6.9757%, 7.2308% and 7.6404% respectively with a total amount of Rs. 2.35 billion being accepted.

According to unconfirmed reports outflows from the system were via the commodity financing scheme did take place, but the overall impact on the short term market was non-existent. But whether this will be the case in the next couple of weeks is doubtful, as financing under this avenue is expected to rise. Another two way OMO will in all probability be announced next week keeping in mind the outflow of Rs. 3 billion on the 25th, but chances of light amounts being accepted through the five month repo or outright sale of T-Bills cannot be ruled out. We are of the opinion that the impetus for banks running short to cover their positions in repos as well as in call over the year end should build up. It would be timely for the SBP to step in and make an injection to avoid a potential interest rate spike.



1 Year 08.00 08.00 10.35%
2 Year 08.75 08.75 13.25%
3 Year 09.25 09.25 13.50%
4 Year 09.50 09.50 13.75%
5 Year 09.75 10.00 14.25%
10 Year 10.75 11.00 14.50%



Bid Date Instrument Result Settlement
May 17 T-BILL May 17 May 18
Target Amount Bid Amount Accepted Amount
Rs. 4.461 Bln

Rs. 8.275 Bln

  Rs. 2.350 Bln



Instrument Data Amount


04 May

28,050 Mln


18 May

4,425 Mln





This Week

1 Wk Ago

1 Yr. Ago

Overnight 01.50 08.00 03.50
1 Week 04.25 06.00 05.50
1 Month 06.25 06.90 08.00
3 Month 06.85 07.10 08.75
6 Month 07.10 07.15 09.15
1 Year 07.50 07.55 N. A.



Maturing This Week 1 Wk Ago 1 Yr Ago
1 Month 06.75 07.35 09.00
2 Month 07.00 07.15 09.00
3 Month 07.00 07.15 09.10
4 Month 07.10 07.20 09.25
5 Month 07.10 07.20 09.25