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Pakistan Money Market Review

Updated on July 07, 2001

The new fiscal year dawned on the money market amid liquid conditions. Excess liquidity in the system coupled with all fears of a interest rate hike and the discount window's closure being dispelled, caused a slide in rates across the board. However, with the Pak rupee still under pressure some market players were relatively cautious on the outcome of the weekly OMO on Thursday. Overnight rates crashed to pre-June 30th levels of 1.00% with a sigh of relief in the market. Rates rose back slightly on the weekend and touched 6.00% only to be seen falling back to 2.00%. The one and two week trades were also conducted as low as 4.00% and 5.50%. This trend did change but temporarily and one and two week levels touched 6.00% and 8.00%.

Term rates also came under pressure due to the trend in the short term market. One month rates fell off by 200 b.p.s from pre-July quotes. Bids of 9.00% and 9.25% were squared of by the lenders desperately wanting to part with their liquidity. With an OMO maturity of Rs. 3 billion falling on Thursday, SBP invited offers for the one, two and four week tenors. Offers in the respective tenors already having jumped in the market and banks expecting a heavy acceptance in the OMO, offers in the OMO were quoted at much higher levels. SBP accepted a total of Rs. 4.50 billion with the cut-off's for the one and four week tenor at 11.00% and 11.50%. respectively. Interesting developments were witnessed in the longer tenors of three and six months. Three and six month offers fell to as low as 11.25% and 11.75%, levels at which borrowers mostly covered themselves. The advantage being funds for crossing the next two quarters ends of September 30th and December 31st at levels of 100-150 b.p.s below the last T-Bill cut-offs. Aggressive bidding for the 28/06/01 six month T-Bill saw moderate amounts being dealt at levels ranging between 12.00% and 12.25%, keeping in mind the cut-off and weighted average yields in the auction for this paper were 13.10% and 12.88%. Another advantage of buying this paper over lending six months was the maturity of this paper falling on the 27th December 2001. i.e. before the year end.

The past one week has reflected the change in sentiment that took place at the onset of the new fiscal year 2001-02. It seems that market players actually anticipate a downward adjustment in the cut-offs on T-Bills. However, we feel that the authorities may not actually bring off the yields on the three, six and twelve month T-Bills by 60-70 basis points as felt by some in the market, but in fact keep them marginally below the weighted average yields of the 28th June 2001 papers.

YIELD PROFILE

FEDERAL INVESTMENT BONDS

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THIS WEEK

1 WEEK AGO

1 YEAR AGO

1 Year

13.00

13.00

07.80%

2 Year

13.50

13.40

08.50%

3 Year

14.00

13.80

09.00%

4 Year

14.25

14.25

09.25%

5 Year

14.50

14.50

09.50%

10 Year

15.00

15.00

09.80%

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AUCTIONS
BID DATE INSTRUMENT RESULT SETTLEMENT
Jun 27 T-BILL Jun 27 Jun 28
TARGET AMOUNT BID AMOUNT ACCEPTED AMOUNT
Rs.12,800 Mln

Rs.16,730 Mln

Rs.16,630 Mln



MATURITIES

INSTRUMENT

DATE

AMOUNT

T-Bill

26 June

2,669 Mln




REPO RATES

 

THIS WEEK

1 WEEK AGO

1 YEAR AGO

Overnight

03.50

13.00

01.00

1 Week

05.50

12.00

03.00

1 Month

10.25

11.50

06.00

3 Month

11.25

11.80

06.80

6 Month

12.20

12.30

07.15

1 Year

12.60

12.60

N.A




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

1 Month

11.25

12.50

06.80

2 Month

10.90

11.70

07.00

3 Month

11.35

11.80

07.10

4 Month

11.70

12.00

07.15

5 Month

12.10

12.30

07.20