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Pakistan Money Market Review

Updated on Dec 25, 2000

The money market maintained a firmish trend for most of the past week. Outflow on account of OMO maturities kept the market stuck to the 12.90% level. Banks also borrowed call funds for overnight in the region of 14.00% as well. An OMO injection of approximately Rs. 12 billion for a period of only one week was witnessed which did cause overnight levels to ease albeit marginally and temporarily. The market rose back sharply on Saturday and closed short with discounting of approximately Rs. 8-9 billion being reported at the State Bank. This sudden change did not come as a surprise but traders were caught unaware by the magnitude of withdrawals on account of Eid, while another reason could have been that banks augmented their reserves on the first day of the reporting week done primarily due to the Eid Holidays (27th-29th Dec.) and the Quaid-e-Azam Day (25th Dec.) falling next week. The other activity that was witnessed was in the two week tenor with some banks managing to borrow funds and covering their year end position at levels close to 14.50% and some higher as well. On the other hand the term repo market was rather inactive with rates remaining mismatched in most tenors. The long term debt market was also rather inactive with trades for the 26th December PIB being virtually nil. Sellers were even willing at levels of 100.25 with bids generally lacking. A tight market coupled with the year end liquidity issue kept the buyers away from the gray market.

On the other front the State Bank having to meet the IMF guideline regarding the reduction of the Net Domestic Assets (NDA) and also to provide relief to the liquidity struck money market made a number of changes. The State Bank brought about another change in the Cash Reserve Requirement (CRR) by bringing it down to 3.00% (daily minimum) from the existing 4.00% (daily minimum) to be maintained on a daily basis. This is to go into effect from the 30th of December and would be reversed on the 5th of January 2000. Such a move could actually provide the much needed relief on the year end keeping in mind the expected outflows on account of the PIB auction (a target amount of Rs 10 billion) and the OMO maturity of Rs. 12 billion both scheduled for the 30th of December. Issuing T-Bills for a period of two weeks against the rupee equivalent of SWAP deposits (unda the F E. 45 schame) already lying with SBP has actually made the reduction of NDA possible. These deposits already earning a return of approximately 15.00% would be convened into T-Bills and issued to the respective banks. According to unconfirmed reports approximately Rs 30 billion of T-Bills are expected to be issued.

Major changes in the money market could provide the much needed relief to the money market. The market still maintains a tight outlook, but after the announcement of the imminent change in the reserve requirement, to go into effect on the 30th, it does seem that the SBP may just be able to take a grip of the liquidity problems currently persisting in the market.

YIELD PROFILE

FEDERAL INVESTMENT BONDS

.

THIS WEEK

1 WEEK AGO

1 YEAR AGO

1 Year

12.25

12.25

11.00%

2 Year

12.75

12.75

12.00%

3 Year

13.35

13.35

12.75%

4 Year

13.75

13.75

13.00%

5 Year

14.00

14.00

13.25%

10 Yeas

14.75

14.75

14.00%

.


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

12.95

10.50

08.00

1 Week

12.60

09.75

07.50

1 Month

13.25

13.00

10.35

3 Month

11.75

11.85

09.35

6 Month

11.40

11.30

09.65

1 Year

11.75

11.70

N. A.



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

1 Month

14.25

14.00

11.25

2 Month

12.40

12.60

10.00

3 Month

11.90

12.10

09.60

4 Month

11.70

11.90

09.65

5 Month

11.40

11.60

09.70