Pakistan Money Market Review

Updated on Apr 14, 2001

The liquidity crunch which was evident ended 7th April, continued unabated with overnight repo rate remaining at 12.95%. The market had to tap the SBP discount repo window for respite on a daily basis with the figure being Rs. 3.50 billion and as high as Rs. 13.80 billion. Open Market Operation maturities coupled with reserve averaging by banks did cause the discounting figure to ease off during the week but later the figure climbed back up and touched a maximum on Friday. In fact, even the State Bank was not keen on providing respite through the weekly OMO and was willing to enter into repo agreements with the banking sector on Thursday. The magnitude of the discounting did cause some alarm early in the week, keeping in mind the Pakistan Investment Bond auction due on the 17th, but sentiment was far from panic.

Players in the term market seemed not too worried about the shortness prevailing in the market. Heavy amounts were dealt in the one month tenor, the most volatile of all. Initial quotes were available at 11.20% and 11.40%. Trades were conducted at 11.10% and 11.20% but rates actually fell off prior to the OMO on Thursday. Further activity was reported at 10.75% with bids later falling to lows of 10.25% before rising back to 10.75% on the announcement of the OMO. The one month levels still remained unchanged even after the rejection of all bids in the OMO. Participants generally quoted very high offers to place funds with the State Bank in the four week tenor with unconfirmed news of rates higher than 11.50%. Sentiment in the three and six month tenors remained very much the same as witnessed at the time of the T-Bill auction on the 6th of April. Lenders continue to place funds in the three month tenor at 11.25% while offers for six months are at around 11.60%. On the other hand the secondary market for outright T-bills has somewhat picked up after the readjustments in the cut-off levels in later March. Buyer for the latest six month and one year T-Bill showed their interest at levels of 11.50% and 11.90%, but sellers were willing at 11.35% and 11.75% for the respective papers.

Gauging by the interest that prevails in the interbank market for structured tractions involving long term paper, participation in the PIB auction on the 17th is expected to be healthy. As specifically mentioned in our last weekly, inflows on account of bond maturities with public sector enterprises were reported in the past week. Besides these maturities which would are expected to be directed towards buying for the PIBs, moderate amount trades for these papers have also been conducted in the secondary market.

YIELD PROFILE
FEDERAL INVESTMENT BONDS
.	THIS WEEK	1 WEEK AGO	1 YEAR AGO
1 Year	12.25	12.25	08.25%
2 Year	12.50	12.65	09.25%
3 Year	12.75	12.85	10.00%
4 Year	13.00	13.00	10.25%
5 Year	13.25	13.25	10.75%
10 Year	13.50	13.50	11.25%

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AUCTIONS
BID DATE	INSTRUMENT		RESULT		SETTLEMENT
Apr 03	T-BILL		Apr 03		Apr 06
TARGET AMOUNT		BID AMOUNT		ACCEPTED AMOUNT
Rs.3,500 Mln		Rs.29,300 Mln.		Rs.16,450 Mln

MATURITIES INSTRUMENT DATE AMOUNT T-Bill 06 Apr 3,710 Mln T-Bill 13 Apr 500 Mln T-Bill 19 Apr 5,200 Mln

REPO RATES   THIS WEEK 1 WEEK AGO 1 YEAR AGO Overnight 12.95 12.90 07.00 1 Week 12.50 10.75 06.50 1 Month 11.10 10.50 06.90 3 Month 11.15 10.90 06.90 6 Month 11.40 11.40 07.10 1 Year 11.65 11.75 N. A.

TREASURY BILL RATES MATURING THIS WEEK 1 WEEK AGO 1 YEAR AGO 1 Month 12.10 11.50 07.75 2 Month 11.10 10.75 07.35 3 Month 11.20 10.90 07.30 4 Month 11.25 11.10 07.25 5 Month 11.40 11.30 07.10