. .



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