Updated on Oct
27,
2001
The State Bank of Pakistan finally announced the much
awaited cut in the repo discount rate. This was followed by a crash of
term levels in the market while at the same time heavy trading was
reported in PIBs and FIBs. Further, inflows were reported that caused
the liquidity crunch in the market to eased off significantly and the
authorities did not find it necessary to conduct any OMOs to inject
liquidity.
The reduction in the discount rate did not come as a
surprise and banks had already anticipated such a change some time back.
However, what was rather extraordinary was the magnitude; a 200 basis
points reduction. This regulatory change came after nearly two months as
the last time SBP had cut the rate at which it provides respite to banks
had been on the 17th of August when it was brought down from 13% to 12%
The current reduction now makes it stand at 10%. The initial reaction
was evident in the term market where heavy trades were witnessed in the
three and six month tenor at levels between 8.25% and 8.75%. However,
rates continued to fall to as low as 7.5% in the three month tenor. In
fact the slide was so sharp that banks even placed tour month funds at
around 7.50%, but later rates rose back up. The one month tenor also
fell off sharply after overnight rates crashed even with OMO maturity
outflows from the system. Lenders placed funds in the range of 6.75% and
7.25% but amounts traded were thin. This change in the discount rate
affected bond prices with the 30th October 10 year PIB, to be issued
next week, traded at premiums as high as 104.50. A downward adjustment
is also expected in the coupon rates of these long term government bonds
after this auction that still carries a coupon rate of 13.00%. It is
important to note that PIBs were introduced and issued last December and
the expected change in the coupon rates would be the second reduction on
these bonds since then.
The 10 years bond auction should certainly bring in
heavy participation at premiums. The bidding amount is certain to cross
the Rs 12 billion pre-auction target that was announced prior to the cut
of 200 b.p.s. in the repo discount level.
| YIELD PROFILE |
FEDERAL INVESTMENT BONDS |
| . |
THIS
WEEK |
1
WEEK AGO |
1
YEAR AGO |
|
I Year |
09.00 |
11.00 |
12.50% |
|
2 Year |
09.90 |
11.50 |
13.00% |
|
3 Year |
10.60 |
12.00 |
13.75% |
|
4 Year |
11.00 |
12.50 |
14.00% |
|
5 Year |
11.50 |
12.75 |
14.25% |
|
10 Year |
12.50 |
13.50 |
15.00% |
| AUCTIONS |
| BID
DATE |
INSTRUMENT |
RESULT |
SETTLEMENT |
| Oct
17 |
T-BILL |
Oct
17 |
Oct
18 |
| TARGET AMOUNT |
BID AMOUNT |
ACCEPTED AMOUNT |
| Rs
6,750 Mln |
Rs. 13,350 Mln |
Rs.3,550
Mln |
|
|
| MATURITIES |
INSTRUMENT |
DATE |
AMOUNT |
|
T-Bill |
04 Oct |
3,960 Mln |
|
T-Bill |
18 Oct |
3,600 Mln |
|
|
|
REPO RATES |
|
THIS WEEK |
1 WEEK AGO |
1 YEAR AGO |
|
Overnight |
09.90 |
07.00 |
12.95 |
|
1 Week |
08.00 |
09.75 |
12.95 |
|
1 Month |
07.75 |
09.70 |
12.00 |
|
3 Month |
07.95 |
09.90 |
11.70 |
|
6 Month |
08.25 |
10.25 |
11.75 |
|
1 Year |
08.60 |
10.60 |
12.50 |
|
|
|
| TREASURY
BILL RATES |
| MATURING |
THIS WEEK |
1 WEEK AGO |
1 YEAR AGO |
|
1 Month |
08.50 |
10.75 |
13.00 |
|
2 Month |
08.00 |
09.80 |
12.35 |
|
3 Month |
08.10 |
09.90 |
12.05 |
|
4 Month |
08.15 |
10.00 |
12.10 |
|
5 Month |
08.20 |
10.15 |
11.90 |
|
|
