. .



Pakistan Money Market Review

Updated on Oct 16, 2000

The money market continued to pass through the liquidity crunch, which was created after the 2.00% and the 100 b.p.s. increase in the cash reserve requirement and the repo discount rate, respectively largely in order to crop up the rupee. The rupee which has lost approximately 13.00% of it's value since the end of July, when the trading band was lifted, has somewhat stabilized due to these measures which were taken by the authorities in the previous week. The discounting figure at an all time high of Rs. 30 billion caused only moderate amounts to be traded in overnight band of 12.95% to 13.00%. Some players were willing to cover themselves for one and two weeks at 12.95% and 12.75%, respectively but trades were hard to come by as lenders preferred to place their excess liquidity only in overnights and hence hedge themselves against any possible attrition on their own cash flows. An OMO maturity of Rs. 8 billion on Thursday could only bring the discounting figure down to around Rs. 20 billion which rose back up and touched Rs. 25 billion on Friday.

It was the term market that witnessed a reversal, with volatility persisting throughout the week. Repo rates in the 3 and 6 month tenors were at significantly higher levels than the cut-offs in the recent auction. It was the six month tenor that initially saw activity with bids at 12.75% being squared off and falling to 12.25%. However the slide continued and trades were conducted at 12.00% as well. The three months tenor which had traded even higher than the discount rate i.e. at 13.25% also came under pressure and fell off significantly with trades as low as 12.25% before turning back and touching 12.75%. It was only towards the weekend that the term market witnessed lending interest in the range of 12.25% to 12.50% in the three month tenor while offers for 6 month money was lower by another 20 to 30 b.p.s. The OMO this past week happened to be two way in nature, but this happened to be of little subsequent consequence was totally rejected. However the important point to note here being the approximate Rs. 17 billion worth of borrowing interest indicated in the two and four week tenors. This rejection did not come as a surprise, especially at a time when the authorities are trying to keep the market firm.

No major change was witnessed during the past week, keeping in mind the turbulence witnessed in the money and foreign exchange market towards the end of September and early October. False rumors of another hike in the discount rate have been dispelled for the time being. However with the auction scheduled for the coming week, market participants are anxious to see whether another 75-100 b.p.s. further increase in the yields on GoP's Treasury Bills could be on the cards.

YIELD PROFILE

FEDERAL INVESTMENT BONDS

.

THIS WEEK

1 WEEK AGO

1 YEAR AGO

1 Year

12.75

14.00

11.25%

2 Year

13.25

14.50

12.25%

3 Year

14.00

15.00

13.50%

4 Year

14.25

15.25

13.75%

5 Year

14.75

15.75

14.00%

10 Year

15.25

16.25

14.50%




AUCTIONS
BID DATE INSTRUMENT RESULT SETTLEMENT
Oct 04 T-BILL Oct 04 Oct 05
TARGET AMOUNT BID AMOUNT ACCEPTED AMOUNT
Rs.7.900 Bln.

Rs.12.800 Bln.

Rs.11.500 Bln.



MATURITIES

INSTRUMENT

DATE

AMOUNT

T-Bill

05 Oct

7,300 Mln

T-Bill

06 Oct

600 Mln

T-Bill

19 Oct

4,550 Mln




REPO RATES

 

THIS WEEK

1 WEEK AGO

1 YEAR AGO

Overnight

12.95

12.95

12.90

1 Week

12.95

13.25

11.00

1 Month

12.90

13.30

10.10

3 Month

12.25

13.10

10.35

6 Month

12.10

13.25

10.60

1 Year

12.80

13.55

N. A.




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

1 Month

13.90

14.50

10.90

2 Month

13.10

13.75

10.10

3 Month

12.90

13.65

10.45

4 Month

12.90

13.65

10.50

5 Month

12.60

13.60

10.60