Updated on May 11, 2002

Volatility persisted in the interbank money market with activity between wide bands. Inflows on account of corporate loan adjustments by the State Bank were reported as well that caused a slight confusion, thereby affecting the levels. There was no discounting reported even with rates touching the 8.90% level on Friday. The PIB auction of the month announced as well and prices quoted of the three and five year issues reflected a much expected sentiment.

Overnight rates of 8.00% and 8.50% early in the week came off and fell to 4.00% while one and two week activity was also reported at levels of 4.00% and 5.00% respectively. This sudden ease in short term was due to the State Bank making payments for loan adjustments of the local utility company, KESC. A net inflow of approximately Rs. 5 billion was reported that saw the overnight crashing and falling to 3.00%. However this inflow also brought some confusion with it and throughout the week rates remained volatile with activity being witnessed at both end i.e. 2.00% and 8.90%. The term market also fell of sharply with lending from certain quarters in the market causing the one month market to fall off about 125 b.p.s. Most of the activity was system generated and one month trades initially at 5.40% were reported a lows of 4.85% as well. The three and six month offers also eased and were available at 5.70% and 6.15% respectively but only temporarily. The ease in term levels did cause the secondary market of T-Bills to pick up significantly and six month and one year papers changed hands at levels of 6.20% and 6.75%, respectively. The State Bank also announced the PIB auction for the month of May with a preauction target amount of Rs. 3 billion. The trading for the five year paper was reported soon after the announcement with prices between a wide band of 102.20 and 102.60.

Interest in the longer dated T-Bills has picked up significantly and we feel that another downward adjustment, though nominal cannot be ruled out in the coming auction. The liquidity in the money market does seems to cause short term rates to remain volatile but any sudden withdrawals will be adjusted by the State Bank's intervention.

YIELD PROFILE
FEDERAL INVESTMENT BONDS
.	THIS WEEK	1 WEEK AGO	1 YEAR AGO
1 Year	07.10	07.10	12.25%
2 Year	07.70	07.70	12.50%
3 Year	08.40	08.45	12.75%
4 Year	08.40	08.45	12.75%
5 Year	09.50	09.50	13.00%
10 Year	10.50	10.60	13.50%

AUCTIONS
BID DATE	INSTRUMENT		RESULT		SETTLEMENT
May 02	T-BILL		May 02		May 03
TARGET AMOUNT		BID AMOUNT		ACCEPTED AMOUNT
Rs.22,000 Mln.		Rs.44,150 Mln.		Rs.33,750 Mln.

MATURITIES INSTRUMENT DATE AMOUNT T-Bill 02 May 22,000 Mln. T-Bill 16 May 5,200 Mln. T-Bill 30 May 14,407 Mln.

REPO RATES   THIS WEEK 1 WEEK AGO 1 YEAR AGO Overnight 02.50 07.75 12.90 1 Week 03.25 06.75 12.45 1 Month 05.15 05.75 11.50 3 Month 05.70 05.80 11.25 6 Month 06.20 06.25 11.50 1 Year 06.75 06.70 11.75

TREASURY BILL RATES MATURING THIS WEEK 1 WEEK AGO 1 YEAR AGO 1 Month 05.65 06.25 12.50 2 Month 05.60 06.10 11.50 3 Month 05.75 05.80 11.15 4 Month 05.95 06.15 11.25 5 Month 06.15 06.25 11.40