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Pakistan Money Market Review

Updated on Oct 02, 2000

The inter-bank market having remained at rock bottom levels, earlier in the month, finally rose into the double digit levels in the past week. This change in the short term market had been anticipated around the time the authorities accepted the entire amount in the T-Bill auction on the 20th of September. However it was on Friday that the market witnessed a liquidity crunch and registered its first shortfall to the tune of approximately Rs. 11 billion. The mopping up of Rs. 9.15 billion in the OMO on Thursday was primarily to be blamed for the discounting figure of this magnitude. The market remained at the 11.95% level throughout the day with the market squaring off at the end of the day. Reserve averaging by banks on the first day of the reporting week was attributed for banks not approaching SBP for respite.

Term market rates also shot up significantly the past week. The one month market which had remained well within 8.25% and 9.00% also touched the double digit mark. However trades remained scarce with bids and offers at 9.25% and 10.00%. The three month shot up significantly only due to bids from certain quarters in the market touching a high of 9.65% and offers at 10.00%. Trades were initially witnessed around the 9.25% level while later trades were also reported at 9.65%. The six month market was relatively quiet with lenders looking at levels close to 10.25% but bidders generally remained silent. Market conditions did compel borrowers to look for funds at 9.75% but rates remained mismatched. The two way OMO did manage to attract a total of about Rs. 14 billion with participation mostly on the reverse repo side by the market. SBP picked up a total of Rs. 9.15 billion with accepting the bids in the two, six and eight week tenors. The revised cut-offs in these tenors were 9.25%, 9.45% and 9.50%, respectively. It was the cutoff in the eight week tenor that saw the tenor rates also rising and touching the 10.00% mark.

As with most quarter ends, false rumors pertaining to the SBP halting the discounting facility at this time were heard. But this failed to any impact on the overnight market and there was virtually no apprehension about rates going beyond the discount rate. In the primary market the T-Bill auction is due next week and banks are yet again anxious to see the manner in which the authorities would be accepting bids. Tight secondary market conditions and a rising interest rate scenario will act in pushing banks to bid at comparatively high levels and an upward revision in rates is almost certain. In fact serious and decent bids in double digits in the next auction in the 3 month tenor (let alone the 6 month and the 1 year tenor) cannot be ruled out, mainly with the intention to tempt the central bank to pick up these funds and subsequently drive rates higher. We feel that the SBP should take this matter seriously and provide firm benchmarks for all tenors in the auction; in the absence of which an interest rate spiral will occur which will be extremely difficult to cap.

YIELD PROFILE

FEDERAL INVESTMENT BONDS

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THIS WEEK

1 WEEK AGO

1 YEAR AGO

1 Year

11.25

09.75

11.00%

2 Year

11.75

10.90

12.25%

3 Year

12.25

11.00

12.75%

4 Year

12.50

11.25

13.00%

S Year

12.75

11.50

13.75%

10 Year

13.25

12.00

14.50%

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AUCTIONS
BID DATE INSTRUMENT RESULT SETTLEMENT
Sep 20 T-BILL Sep 20 Sep 21
TARGET AMOUNT BID AMOUNT ACCEPTED AMOUNT
Rs.1.408 Bln.

Rs.12.250 Bln.

Rs.12.250 Bln.


 
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

11.90

09.00

10.00

1 Week

11.50

08.15

10.00

1 Month

09.50

08.75

10.40

3 Month

09.60

08.80

10.25

6 Month

10.15

09.45

10.50

1 Year

10.60

09.75

N. A.



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

1 Month

10.75

09.75

10.00

2 Month

10.20

09.15

10.75

3 Month

10.25

09.25

10.70

4 Month

10.30

09.40

10.65

5 Month

10.40

09.50

10.60