Pakistan Money Market Review

Updated on Aug 11, 2001

The interbank money market traded in single digits in the early parts of the week. The market continued to be running long which was reflected in the bid patter for the Treasury Bill auction settling on the 9th of August which saw a total participation of Rs. 22.896 billion for all the three papers. It was only after the auction that the market turned upwards and touched the 12.90% level. Borrowers hurriedly covered themselves for one and two weeks initially at 10.50% in both tenors, while later trades were also witnessed as high as 11.25% and 11.75% in the respective tenors. Nominal amounts were also reported to have been discounted on Friday.

Significant interest was evident in the T-Bill auction as the term market having already remained depressed and repo rates had touched significant lows. Three and six month repos had traded at lows of 10.00% and 10.85% respectively, while the 26th July six month T-Bill was also traded below 11.00%. As forecasted in our last write-up, the yields on all the papers were adjusted downwards. Yields on the three, six and twelve month papers were lowered by 27, 16 and 24 basis points respectively. Keeping in mind the pre-auction target of Rs. 1.70 billion, the yields could have been lowered further but SBP picked up Rs. 8.80 billion with the yield on the papers at 11.18%, 11.45%, and 11.75%. It was after this acceptance that term rates also shot upwards with borrowers quickly picking up three month funds in repo as well in call at levels of 10.75%. Three month rates did jump up by about 50 b.p.s. but lenders/ buyers in the six month tenor/ paper were still willing to levels of 11.20%.

It is quiet evident from the T-Bill auction the past week, that SBP is not quite willing to bring rates down rather aggressively. Pressure from the IMF, keeping in mind that a monitoring team is due next week and the Pak rupee still reflecting signs of weakness, SBP would be maintaining the yields on its T-Bills in the band of 11.00% and 12.00%. Furthermore we fell that current auction yields would continue to attract buyers that are already willing in the secondary market as well.

Federal Investment Bond
.	THIS WEEK	1 WEEK AGO	1 YEAR AGO
1 Year	11.90	12.00	08.25%
2 Year	12.40	12.50	08.50%
3 Year	12.90	13.00	08.85%
4 Year	13.00	13.25	09.00%
5 Year	13.50	13.50	09.35%
10 Year	14.00	14.00	09.50%

.

AUCTIONS
BID DATE	INSTRUMENT		RESULT		SETTLEMENT
Aug 08	T-BILL		Aug 08		Aug 09
TARGET AMOUNT		BID AMOUNT		ACCEPTED AMOUNT
Rs.1,700 Mln		Rs.23,796 Mln		Rs.8,800 Mln.

MATURITIES INSTRUMENT DATE AMOUNT T-Bill 09 Aug. 7,352 Mln T-Bill 23 Aug. 5,652 Mln

REPO RATES  . THIS WEEK 1 WEEK AGO 1 YEAR AGO Overnight 12.50 04.00 10.95 1 Week 11.38 06.50 08.00 1 Month 10.25 09.00 07.10 3 Month 10.63 10.20 07.20 6 Month 11.23 11.00 07.45 1 Year 11.50 11.50 N.A

TREASURY BILL RATES MATURING THIS WEEK 1 WEEK AGO 1 YEAR AGO 1 Month 11.25 09.75 08.00 2 Month 10.75 10.40 07.60 3 Month 10.80 10.50 07.50 4 Month 10.90 10.70 07.50 5 Month 11.00 10.90 07.50