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Updated on Jul 03, 2000

The short term market remained relentless. In spite of the net shortage falling to virtually zero on Thursday (29/06/2000), the overnight quote refused to let up as the liquidity crunch relapsed on the 30th of June as the discounting figure shot up to an estimated Rs. 7.0 bln to Rs. 8.0 bln. Traders attributed this sudden disappearance of funds to various govt. flows as well as export finance related payments. None of these payments are likely to have any long term bearing on the system. Although the near term outlook still appears to be considerably tight.

The tightness in the short term market coupled with the anticipation of overnights overshooting the discount rate, led to a jump in the 1 month quote. Heavy demand for funds in this tenor led to levels rocketing from a comparatively sedate 9.25% to 9.50% to 10.00% with overall volumes being significant on the 28th of June. Needless to add the 3 month quote also showed signs of buoyancy with trades being reported as high as 7.95% towards the tail end of the week. Light to moderate interest in longer tenors such as 6 months did lead to trades at dizzy heights of 7.80%. Banks having opted to lock in their funds at these peaks in both 3 month and 6 months are likely to have a windfall as the medium term market is already showing signs of deflating. With the fiscal year end over and the overnight quote being restricted to 11.00%, any fears of an imminent spike are over. This was evident from the complete rejection of the latest bill auction by the State Bank this week.

We are of the opinion that the State Bank is in no mood to raise interest rates by a long shot. The latest auction attracted a comparatively paltry participation from the market, which was largely expected considering the tightness prevailing. Out of the total bid amount of Rs. 2.1 bln, only Rs. 430 mln was placed anywhere in proximity to any pervious cut-offs; at 7.29% in 6 months (whereby the previous cut-off in this instrument was 7.23%). But this failed to gain the attention of the State Bank. The next week appears to be firm, but there is a scheduled OMO which should see an injection if the market is to be shielded from further shock brought on by a simultaneous OMO injection-maturity of Rs. 7.90 bln, next week. The anticipation of State Bank intervention coupled with the fiscal year end being over, most bidders should be taking a breather and hence shave off at least 20 to 30 b.p.s from both the 3 and 6 month quote.

 

YIELD PROFILE

FEDERAL INVESTMENT BONDS

.

THIS WEEK

1 WEEK AGO

1 YEAR AGO

1 Year 08.25 08.25 09.50%
2 Year 09.00 09.00 09.50%
3 Year 09.50 09.50 12.75%
4 Year 09.75 09.75 13.00%
5 Year 10.00 10.00 13.25%
10-Year 10.50 10.50 14.00%

 


 

AUCTIONS
BID DATE INSTRUMENT RESULT SETTLEMENT
Jun 28 T-BILL Jun 28 Jun 29
TARGET AMOUNT BID AMOUNT ACCEPTED AMOUNT
Rs. 1.000 Bln.

Rs. 2. 36 Bln.

Rejected

 


 

MATURITIES

INSTRUMENT

DATE

AMOUNT

T-Bill 01 Jun 50 Mln
T-Bill 15 Jun 1,750 Mln
T-Bill 23 Jun 1,045 Mln
T-Bill 29 Jun 100 Mln

 


 

REPO RATES

 

THIS WEEK

1 WEEK AGO

1 YEAR AGO

Overnight 10.95 10.90 04.50
1 Week 10.90 10.25 07.00
1 Month 09.65 08.40 07.50
3 Month 07.60 07.60 07.25
6 Month 07.50 07.50 07.75
1 Year 07.60 07.60 N. A.

 


 

TREASURY BILL RATES
MATURING THIS WEEK 1 WEEK AGO 1 YEAR AGO
1 Month 10.50 09.25 08.00
2 Month 09.00 08.25 07.25
3 Month 08.00 07.75 07.50
4 Month 08.00 07.70 07.50
5 Month 07.85 07.65 07.75