Pakistan Money Market Review

Updated on Oct 30, 2000

No change was witnessed in short term rates in the money market. Overnight trading continued unabated at the 12.95% and 13.00% levels. Banks were also willing to borrow one and two week funds at similar levels but offers failed to come by. The shortness in the market was unchanged with the figure falling below Rs. 10 billion during the week only to be seen touching Rs. 20 billion on Friday. This variance of the amounts discounted during the week was generally due to the reserve averaging by the banks. The OMO on Thursday did generate significant interest as witnessed by the participation but rates remained unmoved due to the OMO's rejection. The OMO, two way in nature, saw banks bidding on both sides while concentrating was evident on the borrowing side.

On the other hand, significant interest was evident in the medium term market. Market players were quoting rates from forward dates as well. Most of the activity was in the one month tenor with rates in the initial parts of the week at 12.00% but later falling to 11.25% in spot as well as from the 2nd of November. It was sudden trades at 11.50% that caused offers to jump back and close to 12.00% at the end of the week. Unlike one month, rates in the three and six month tenors remained well in calmer waters. Trades were scarce with bids and offers also hovering between the band 11.60% and 12.00% with similar quotes also from the 2nd of November. According to unconfirmed reports a total of Rs. 15 billion of bids were for repos in the OMO, while Rs. 9.50 billion of bids were received for reverse repos and also the outright purchase of T-Bills. The rejection did not come as a surprise at all, keeping in mind the levels that the State Bank must have received for the sale of securities while an injection in the crunch-hit money market was not the case to be as well.

Short term rates have already been at sky high levels for a month (since 28th September) and a respite in the money market can only come in the shape of a rejection in the coming auction as a total of Rs. 23.30 billion of T-Bills are expected to mature. The authorities have already rejected the past week's OMO and the previous auction only saw an acceptance of Rs. 200 million thereby reflecting the level of rates that they wish to maintain on its six month paper. We feel that bidding in the coming T-Bill auction on the 2nd of November is going to be aggressive due to the upcoming maturity. Furthermore chances of any major increase in cut-off levels also seem a distant possibility.

YIELD PROFILE
FEDERAL INVESTMENT BONDS
.	THIS WEEK	1 WEEK AGO	1 YEAR AGO
I Year	12.50	12.50	10.50%
2 Year	13.00	13.00	11.25%
3 Year	13.75	13.75	12.00%
4 Year	14.00	14.00	12.25%
5 Year	14.25	14.25	12.75%
10 Year	15.00	15.00	13.75%

AUCTIONS
BID DATE	INSTRUMENT		RESULT		SETTLEMENT
Oct 18	T-BILL		Oct 18		Oct 19
TARGET AMOUNT		BID AMOUNT		ACCEPTED AMOUNT
Rs.4.643 Bln.		Rs.11.770 Bln.		Rs.200 Mln.

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 12.75 1 Week 12.70 12.95 08.25 1 Month 11.68 12.10 07.35 3 Month 11.50 11.70 08.40 6 Month 11.58 11.75 09.40 1 Year 12.13 12.20 N. A.

TREASURY BILL RATES MATURING THIS WEEK 1 WEEK AGO 1 YEAR AGO 1 Month 12.65 13.10 08.25 2 Month 12.05 12.20 08.00 3 Month 11.75 12.10 08.60 4 Month 11.20 12.05 08.80 5 Month 11.80 12.00 09.40