Pakistan Money Market Review

Updated on Nov 13, 2000

The interbank market remained firm throughout the week. The Open Market Operation, the primary market activity held every alternative week, was also rejected, thereby keeping the market liquidity status unchanged. The year end drawing nearer and also no ease in the liquidity crunch of the money market, rates rose up sharply in the short and medium term market. One and two week levels remained well around the 12.95% level with no ease expected. The shortfall in the market remained within the band of Rs 11-15 billion with banks continuously approaching the State Bank repo window for respite. The figure rose back on Friday, primarily due to the reserve averaging by banks

Term market activity was brisk with rates in all tenors registering a sharp rise on the other hand. Trades, in tenors ranging from forty-five days to three months, were the highlight of the week. Banks borrowed funds for forty-five days at levels between 12.25% and 12.40% Heavy lending was evident in this tenor while offers for two month remained initially at 12.25% but later rose to 12.50%. One month trades were scarce with lenders generally looking at 12.50% but later at 12.75%. With rates in the above mentioned tenors rising sharply, three month bids also rose from post auction levels of 11.30% and 11.50% to touch 12.00%. The spread of 100 b.p.s between the SBP six month T-bill auction cut-off (11.00%) and the three month secondary market repo rate being the widest since October did compel banks to place their funds at 12.00% Traded amounts were moderate and later bids eased off to 11.80%, in this tenor. The result of the OMO was not much of a surprise for the market. Bids were received on both sides, the repo and reverse repo / outright sale of T-bills, but a rejection appeared to be a certainty. A further drain from the market by way of selling T-bills and / or an inflow was not the case to be.

Dry and short conditions in the interbank market are expected to remain for some time now. The discounting figure of Rs 11-15 billion continues to be unaffected while unconfirmed rumors of outflows by way of agriculture payments abound, which is not helping the situation either. However, secondary market rates for three and six month are expected to ease off from the current 12.00% level, as the auction maturity of Rs 4.85 billion draws nearer.

YIELD PROFILE
FEDERAL INVESTMENT BONDS
.	THIS WEEK	1 WEEK AGO	1 YEAR AGO
1 Year	12.10	11.85	10.60%
2 Year	12.75	12.75	12.00%
3 Year	13.25	13.20	13.25%
4 Year	13.50	13.40	13.50%
5 Year	14.00	14.00	13.75%
10 Year	14.75	14.50	14.25%

AUCTIONS
BID DATE	INSTRUMENT		RESULT		SETTLEMENT
Nov  01	T-BILL		Nov 01		Nov 02
TARGET AMOUNT		BID AMOUNT		ACCEPTED AMOUNT
Rs.23.415 Bln.		Rs.23.515 Bln.		Rs.13.850 Bln.

MATURITIES INSTRUMENT DATE AMOUNT T-Bill 02 Nov 23,390 Mln T-Bill 16 Nov 4,850 Mln T-Bill 30 Nov 1,850 Mln

REPO RATES   THIS WEEK 1 WEEK AGO 1 YEAR AGO Oversight 12.95 12.95 06.00 1 Week 12.95 12.25 05.75 1 Month 12.55 12.10 07.65 3 Month 12.05 11.30 09.00 6 Month 12.00 11.25 09.60 1 Year 12.00 11.75 N. A.

TREASURY BILL RATES MATURING THIS WEEK 1 WEEK AGO 1 YEAR AGO 1 Month 13.55 13.10 08.50 2 Month 12.65 12.00 09.25 3 Month 12.35 11.60 09.35 4 Month 12.30 11.65 09.45 5 Month 12.20 11.70 09.60