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Pakistan Money Market Review

Updated on Sep 18, 2000

Interbank money market activity was witnessed at the year's record low levels. Continuous inflows on account of export refinance funds caused rate to remain under pressure. With the excess liquidity in the market estimated in double digits, the outflow of Rs. 4.70 billion hardly caused the market to change direction. Overnight trades were witnessed as low as 0.25% as desperate lenders continued to place funds at available levels in the market. It was in July that the overnight market had traded at levels of 0.50% and 0.75%. The crash of overnight rates witnessed lenders covering in the one and two week tenors at lows of 4.25% and 5.00% in the respective tenors. It was only on Saturday that overnight rates rose to touch 1.50% and later to around 3.50% at the close of the day.

Term rates having already eased the previous week continued to maintain a similar trend before sliding to low of 5.50% while nominal amounts also changed hands at around 5.30%. This sudden fall in rates can also be attributed to the acceptance of only Rs. 4.70 billion against an aggregate participation of approximately Rs.15 billion. Banks having generally bid in the one month tenor at the previous cut-off of 8.00% or even higher, expecting the authorities to mop up a significant amount, were probably left over with funds as SBP brought the OMO cut-off down by 10 basis points to 7.90% while accepting Rs. 3.30 billion. The other tenors of 1 and 2 week managed to pull out Rs. 250 million and Rs.1.20 billion at 7.25% and 7.75%, respectively. The longer tenors of three and six month which had touched highs of 7.50% and 7.65%, also fell off with nominal amounts changing hands. Early in the week three month activity was witnessed at 7.40% while bids and offers were hovering in the narrow band of 7.00% and 7.10%. Banks have taken this opportunity in ease in term levels to cover their year end as well. Activity was witnessed in the four month tenor at levels of 7.30% while, six month bids and offers also in the band of 7.35% and 7.45% with rates remaining mismatched.

It seems that the levels at which bids were accepted by State Bank in the OMO are set to stay in the primary market, keeping in mind a reduction of only 10 basis points. There is speculation that the cutoff was marginally reduced in order to avoid an otherwise huge acceptance and hence a tight market in it's wake. Secondary market conditions have already reflected the bearish sentiment even with the quarter end lurking just around the corner, mainly on account of an easy short term market. But no key player is yet willing to bet on bill yields coming off in the imminent auction, which is likely to see feverish participation with the cut-off remaining relatively stable.

 

YIELD PROFILE

FEDERAL INVESTMENT BONDS

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THIS WEEK

1 WEEK AGO

1 YEAR AGO

1 Year

08.50

08.50

10.65%

2 Year

08.90

08.80

12.25%

3 'feat

09.40

09.20

13.00%

4 Year

09.80

09.50

13.25%

S Year

10.25

10.00

13.50%

10 Year

10.50

10.40

14.25%

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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.
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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

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.

REPO RATES

 

THIS WEEK

1 WEEK AGO

1 YEAR AGO

Overnight

03.50

01.00

10.75

1 Week

04.75

05.50

09.00

1 Month

06.15

06.75

08.75

3 Month

07.15

07.30

09.15

6 Month

07.40

07.45

10.25

1 Year

05.25

08.50

N. A.

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TREASURY BILL RATES
MATURING THIS WEEK 1 WEEK AGO 1 YEAR AGO

1 Month

07.15

07.65

09.50

2 Month

07.20

07.40

09.75

3 Month

07.30

07.45

09.50

4 Month

07.35

07.50

09.75

5 Month

07.40

07.60

10.25