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Pakistan Money Market Review

Updated on Dec 18, 2000

The interbank market finally witnessed the introduction of the primary dealer based auction system. A Treasury Bill (T-Bill) coupled with a Pakistan Investment Bond (PIB) auction was conducted the past week. Corporate driven interest led the State Bank to off-load all three PIBs i.e. the 3.5 and 10 year papers at a price of 100.10. Against the target of Rs. 4 billion a total amount of Rs. 4.40 billion was raised against these newly introduced papers. On the other hand, the State Bank continued to maintain yields on the 6 month and 1 year paper at 10.96% and 11.49% respectively with an aggregate amount of only Rs. 629.61 million being accepted. Banks generally preferred to stay away from the T-Bill auction, which was largely expected at this time of the year.

The secondary market for the PIBs that had already been active prior to the issue saw moderate amounts changing hands. Majority of the interest was evident for the 10 year paper with trades conducted at prices of 100.40, in effect at yields of 13.92%. The primary market has been actively quoting prices for these bonds as was evident in gray market quotes for the imminent 26/12/00 issue. SBP initially announced a target of Rs. 6 billion but later augmented this to Rs. 10 billion. Trades at premium could have been one of the reasons that may have caused the authorities to do so but lack of interest in T-Bills and a T-Bill maturity expected towards the year end may have also been one of the pressing reasons. The market took this change in the target amount rather negatively and prices for the 10 yr. 26/12/00 issue fell with trades around 100.35 with bids later falling to 100.15. The term repo market was rather inactive the past week. Light one month activity was witnessed at levels close to 12.75% (system based ) but later after the increase in the PIB auction target amount triggered brisk activity with banks hurriedly covering themselves at 13.00% and some higher as well in the same tenor. The short term market remained under pressure and fell further after the net inflow due to the T-Bill auction settlement and maturity. However, it was on Saturday that rate rose slightly and overnight levels crossed into double digit levels. This may have been due to the fact that a net outflow of Rs. 16.70 billion is due on the 21st.

A 2.00% reduction in the Cash Reserve Requirement and an option for a simultaneous one month repo with the State Bank (for the same 2% CRR amount) at 10.00% was announced on Saturday. The market liquidity will not change by this reduction in the CRR but will actually help the SBP in reducing its Net Domestic Assets (NDA), a requisite of the IMF for the agreement reached earlier in the month. On one hand the trading for the PIBs as witnessed during the past week may certainly haste been positive and the momentum may have pushed the prices a little higher than warranted by the market conditions. However, after the sudden increase in the target amount the narrowing of spreads and the lowering of premiums, may actually be reflecting the true sentiment of the market players.

YIELD PROFILE

FEDERAL INVESTMENT BONDS

.

THIS WEEK

1 WEEK AGO

1 YEAR AGO

1 Year

12.25

12.25

11.25%

2 Year

12.75

12.75

12.25%

3 Year

13.35

13.35

13.00%

4 Year

13.75

13.75

13.25%

5 Year

14.00

14.00

13.75%

10 Year

14.75

14.75

14.50%

.


AUCTIONS
BID DATE INSTRUMENT RESULT SETTLEMENT
Dec 13 T-BILL Dec 13 Dec 14
TARGET AMOUNT BID AMOUNT ACCEPTED AMOUNT
Rs.8.050 Bln.

Rs.3.629 Bln.

Rs.629 Mln.


 
MATURITIES

INSTRUMENT

DATE

AMOUNT

T-Bill

14 Dec

500 Mln

T-Bill

28 Dec

7,622 Mln



 

REPO RATES

 

THIS WEEK

1 WEEK AGO

1 YEAR AGO

Overnight

10.50

09.50

12.75

1 Week

09.75

09.25

11.00

1 Month

13.00

12.00

11.00

3 Month

11.85

11.65

09.50

6 Month

11.30

11.55

09.65

1 Year

11.70

11.75

N. A.




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

1 Month

14.00

13.00

12.00

2 Month

12.60

12.20

10.50

3 Month

12.10

11.90

09.70

4 Month

11.90

11.85

09.70

5 Month

11.60

11.80

09.65