. .



Updated on Nov 10, 2001

The money market continued to pass through the liquidity crunch that has been prevailing since the end of October. There was no intervention by the State Bank the past week in the form of an OMO injection and overnight rates remained at the sky high level of 9.90%. This week the coupon rates on Pakistan Investment Bonds were finally cut with the announcement of auction for the three and five year papers. This caused the term market to react with brisk trading being reported in the three and six month tenors as well as outright trades for Treasury Bills.

Overnight rates remained glued at the 9.90% level with occasional dips to 9.25% and 9.50%. The tightness that could have compelled the State Bank to inject towards the end of the week caused one and two rates to slip off slightly but SBP stayed away. Activity in one and two week was conducted at lows of 8.50% and 8.75%. Banks had to approach the State Bank for respite on a daily basis and a maximum discounting of Rs. 10.20 billion on Thursday. The one month rate hardly moved from the 8.00% level and nominal activity was conducted at this level. The cut in the coupon rates on the three, five and ten year PIBs were announced on Tuesday. This adjustment in the coupon rates on PIBs has been done for the second time since these long term bonds were introduced last December. The rates on the three, five and ten year paper now stand at 10.50%, 11.00%, and 12.00%, resulting in a 130, 120 and 100 basis points cut. Simultaneously SBP also announced a pre-auction target of Rs. 5 billion for the three and five year paper auction settling on the 21st. The first impact of this news was three month repos were witnessed at levels close to 8.00%, traded from the middle of November. Besides brisk activity in the term repo and call market, the six month and one year 1/11/01 T-bill was traded at levels of 8.20% and 8.75%. Amounts were thin as sellers were quick to lower their offers and preferred to wait to book further capital gains on these papers that SBP had sold at yields of 8.50% and 9.10% in the 1/11/01 auction.

This flattening of the yield curve for long term clearly reflects that expectations of another SBP discount rate cut are looming in the market. Market players are expecting a cut of 100 basis points but we feel that at this point in time a 50 b.p.s should suffice for a much needed stimulus to the economy badly hit by the ongoing global recession and the crisis after the 11th of September.

YIELD PROFILE

FEDERAL INVESTMENT BONDS

.

THIS WEEK

1 WEEK AGO

1 YEAR AGO

1 Year

08.75

09.00

12.10%

2 Year

09.50

09.90

12.75%

3 Year

10.75

10.50

13.25%

4 Year

11.00

11.00

13.50%

5 Year

11.50

11.50

14.00%

10 Year

12.50

12.50

14.75%

.

 
AUCTIONS
BID DATE INSTRUMENT RESULT SETTLEMENT
Oct 31 T-BILL Oct 31 Nov 01
TARGET AMOUNT BID AMOUNT ACCEPTED AMOUNT
Rs 17,650 Mln  Rs. 23,250 Mln Rs.9,900 Mln



 
MATURITIES

INSTRUMENT

DATE

AMOUNT

T-Bill

01 Nov

17,650 Mln

T-Bill

15 Nov

14,850 Mln

T-Bill 29 Nov 18,047 Mln



REPO RATES

 

THIS WEEK

1 WEEK AGO

1 YEAR AGO

Overnight

09.90

09.25

12.95

1 Week

08.70

08.13

12.95

1 Month

07.90

07.88

12.55

3 Month

07.90

07.88

12.05

6 Month

08.15

08.20

12.00

1 Year

08.50

08.58

12.10




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

1 Month

08.40

08.60

13.55

2 Month

08.10

08.15

12.65

3 Month

07.90

08.10

12.35

4 Month

08.00

08.20

12.30

5 Month

08.10

08.25

12.20