FINEX WEEK

 

 

By SHABBIR H. KAZMI
Updated Nov 16, 2002

 

The interbank money market went through a volatile phase the past week. This volatility was evident in the form of rates in all tenors tumbling to rock bottom levels. This slide in market levels was witnessed after the acceptance of less than the target amount in the six month T-Bill auction. The auction yield on the six month T-bill however remained unchanged but the

trend that followed reflected the desperate buying for government securities. It was only in the late hours of Saturday that the authorities made the much awaited announcement. The SBP cut the 3 day repo discount rate by 150 b.p.s points bringing it down to 7.50% effective the 18th of November.

The trend of the short term market had more or less shifted toward the downward side prior to the auction. Overnight trades at 7.50% and 8.00% had still kept banks cautious as one week trades were conducted at 7.00% and 7.25%. One month activity was brisk as offers came off to 6.25% from the previous week's rate of 7.00% as borrowers covered themselves prior to bidding in the auction. A total amount of Rs. 21.60 billion was accepted at the unchanged yield of 6.37% in the six month paper's auction. It was after the acceptance that market rates plummeted to lows that saw the overnight, one and two week trades as low as 0.50%, 1.75% and 3.00%, respectively. Three and six month rates fell so sharply that deals in both tenors were struck at 5.50% and 5.75% which were about 50-75 b.p.s. lower than rates prior to the auction. Yield for papers also fell sharply with the bench-mark six month paper issued at 6.37%, soon trading at 6.00%. The ten and eleven months to maturity papers also changed hands at new levels in between 6.10% and 6.20% while activity in forward dates for the same papers were reported at around 6.25%. This carnage was not restricted to T-Bills, and papers at the end of the yield curve traded at new levels as well. The ten year bond changed hands at a new price of 113.50 which now will once again see new levels as the trading day starts on Monday.

Rumors were circulating in the market early in the week regarding the discount rate cut but the magnitude of this change of 150 b.p.s. will certainly come a major surprise to many in the market. The last change had been in January this year and it did seem that was the only one for the current year. On the other hand the trading the past week for the long term bonds coupled with no announcement regarding the auction for this month reflects that a change in the PIB coupon rates could be a possibility as well.

YIELD PROFILE

FEDERAL INVESTMENT BONDS

.

THIS WEEK

1 WEEK AGO

1 YEAR AGO

1 Year

06.40

06.75

09.25%

2 Year

06.80

06.95

10.00%

3 Year

07.00

07.15

10.75%

4 Year

07.25

08.00

11.00%

5 Year

07.75

08.15

11.25%

10 Year

08.90

09.15

12.25%

 


 

AUCTIONS

BID DATE

INSTRUMENT

RESULT

SETTLEMENT

Nov 13 T-BILL Nov 13 Nov 14

TARGET AMOUNT

BID AMOUNT

ACCEPTED AMOUNT

Rs.30,000 Mln  

Re.39,925 Mln

Rs.21,600 Mln

 


 

MATURITIES

INSTRUMENT

DATE

AMOUNT

T-Bill

06 Nov

21,600 Mln

T-Bill

14 Nov

30,850 Mln

T-Bill

28 Nov

2,500 Mln.

 


 

REPO RATES

 

THIS WEEK

1 WEEK AGO

1 YEAR AGO

Overnight

00.60

08.90

09.90

1 Week

02.00

07.75

09.00

1 Month

04.50

06.80

08.10

3 Month

05.50

06.40

08.00

6 Month

05.75

06.40

08.25

1 Year

06.20

06.60

08.75

 


 

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

1 Month

05.00

07.10

08.50

2 Month

05.50

06.75

08.30

3 Month

05.60

06.40

08.00

4 Month

05.70

06.40

08.10

5 Month

05.80

06.40

08.30