FINEX WEEK

 

 

By SHABBIR H. KAZMI
Updated Nov 23, 2002

 

The week in the interbank market began with the yield curve moving downwards. The news of the reduction of the discount rate by 150 b.p.s. came in late hours on the weekend, and the reaction was not noted. It were the yields of T-Bills and PIBs that were witnessed at record levels. As mentioned earlier the magnitude of the change came as a surprise and the downward movement of rate in the market was drastic as well. Intervention was witnessed to wipe up the excess liquidity that did not result in any significant change in short term rates.

The overnight rates already at rock bottom levels of 0.50% and 0.75% only moved up and touched the 4.00% mark on the outflow of Rs. 13.00 billion in the OMO. The State Bank intervened on Tuesday, a day after the new discount rate of 7.50% was enforced, and accepted participation in the one week tenor at 2.95% which did seem to save the market from further damage. However, volatility persisted and overnight rates oscillated between 1.00% and 4.00% for the rest of the week. Both prior to and after the OMO, one and two week repo trades were witnessed at around 2.00% and 3.00%, in the respective tenors, with slight hike being witnessed on the weekend. The sensitivity of the market to a change in interest rates was witnessed in the early hours of Monday with the new discount rate of 7.50%. Heavy trading was conducted for the six month and one year T-Bills initially at levels of 5.00% and 5.35% with the real slide was witnessed towards the middle of the week. The July and October 2003 maturity T-Bills traded at lows of 4.60% and 4.90%, respectively. On the other hand the announcement that PIB auctions would be conducted once ever financial quarter coupled with the discount rate reduction caused the prices of long term debt to skyrocket. The ten year paper initially saw a jump of Rs. 10 (from a price of 113 to 123) on Monday but further moved to touch 125.25 resulting in the GoP paper trading at ever low of 7.37%.

The stimulus to encourage growth of corporate credit seems to be falling in line. Record low interest rates, the formation of a government and most importantly the continuation of the policies will help in the new government achieving its medium term objectives. We feel that the market reacted to the discount rate change in an expected fashion and participation for six month and one year papers in the coming auctions will now be very much at levels reflected in the secondary market.

YIELD PROFILE

FEDERAL INVESTMENT BONDS

.

THIS WEEK

1 WEEK AGO

1 YEAR AGO

1 Year

05.10

06.40

09.25%

2 Year

05.70

06.80

09.75%

3 Year

06.00

07.00

10.75%

4 Year

06.00

07.25

11.00%

5 Year

06.35

07.75

11.25%

10 Year

07.35

08.90

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

03.25

00.60

09.90

1 Week

03.00

02.00

09.40

1 Month

03.35

04.50

08.50

3 Month

04.10

05.50

08.20

6 Month

04.50

05.75

08.35

1 Year

05.10

06.20

08.70

 


 

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

1 Month

03.85

05.00

09.10

2 Month

04.10

05.50

08.50

3 Month

04.20

05.60

08.20

4 Month

04.30

05.70

08.25

5 Month

04.40

05.80

08.30