Pakistan Money Market Review

Updated on Sep 11, 2000

Interbank money market conditions remained dry throughout the past week. However, even with the market closing short to a maximum amount of approximately Rs.12 billion on Wednesday, overnight activity was witnessed amid volatility. Early in the week rates remained at 10.95% with nominal amounts traded. It was on Thursday onwards that the market showed signs of easing off. The acceptance of only Rs. 267.27 million and the simultaneous inflows by way of the T-Bill and export refinance funds was the reason for overnight rates touching 8.00% but closing back at 10.95% with the discounting figure falling to around Rs. 6 billion. It was only on Saturday that the market fell off sharply, blamed for further inflows and also due to the option of reserve averaging by banks. Lack of overnight borrowers brought the offers to 8.00% early in the morning with only nominal activity at this level. However, soon the market crashed with offers moving to as low as 3.50% where borrowers covered themselves, while later overnight was traded as low as 1.00% and closing long.

Term market conditions remained somewhat at previous levels. Activity was conducted generally in the longer tenors of three month and six month. It was only after the news of the discounting figure crossing into double digits that caused the 1 month market to touch a high of 8.50%, which later eased off significantly. Trades were reported at a high of 8.25% while towards the weekend the market came off with bids and offers available at 7.20% and 7.60%. The crash in overnight levels further brought offers to a low of 7.25%. Three and six month offers touched 8.00% with lack of borrowing interest at this level. It was only after the auction result that three and six month levels reflected a trading sentiment. Bids and offers were available at 7.40% and 7.60% which later matched at 7.50%, while six month bids and offers remained mismatched at 7.50% and 7.75%. As anticipated the T-Bill auction only managed to attract only Rs. 4.342 billion against the target amount of Rs. 6.65 billion. Bids by the participants were generally driven by secondary market conditions and also on the chances of SBP raising yields. SBP only brought about a marginal change by raising the cut-off for the six month instrument by 10 basis points while the one year yield was maintained at 8.10%, with amounts of Rs. 67.27 and Rs. 200 million being accepted.

The market which has finally eased off in the short term still reflects the bullish view of participants in the market. Three and six month levels having eased off to 7.30% and 7.50% are certain to stay at current levels with continued borrowing interest being generated at these levels, keeping in mind the OMO is yet again lurching around the corner. Furthermore pressures on the foreign exchange side could well keep rates on the instruments inching upwards as witnessed in the T-Bill auction the past week.

YIELD PROFILE
FEDERAL INVESTMENT BONDS
.	THIS WEEK	1 WEEK AGO	1 YEAR AGO
I Year	08.50	08.75	10.50%
2 Year	08.80	09.00	12.25%
3 Year	09.20	09.40	12.90%
4 Year	09.50	09.50	13.00%
5 Year	10.00	09.60	13.50%
10 Year	10.40	09.75	14.25%

.

.

AUCTIONS
BID DATE	INSTRUMENT		RESULT		SETTLEMENT
Sep 06	T-BILL		Sep 06		Sep 07
TARGET AMOUNT		BID AMOUNT		ACCEPTED AMOUNT
Rs.6,650 Bln.		Rs.4,342 Bln.		Rs.267 Mln.

.

.

MATURITIES
INSTRUMENT	DATE	AMOUNT
T-Bill	07 Sep	6,650 Mln
T-Bill	21 Sep	1,108 Mln
T-Bill	27 Sep	2,000 Mln

.

.

REPO RATES
	THIS WEEK	1 WEEK AGO	1 YEAR AGO
Overnight	01.00	10.95	12.25
1 Week	05.50	10.25	12.00
1 Month	06.75	08.15	10.30
3 Month	07.30	07.60	09.50
6 Month	07.45	07.65	10.10
1 Year	08.50	08.60	N.A.

.

.

TREASURY BILL RATES
MATURING	THIS WEEK	1 WEEK AGO	1 YEAR AGO
1 Month	07.65	09.15	11.00
2 Month	07.40	08.00	10.50
3 Month	07.45	07.80	09.90
4 Month	07.50	07.85	09.90
5 Month	07.60	07.85	10.10