Money Market Report
The Money Market remained relatively flat near 12.75% during the week before loosening up at the end of the Nov 6’09 week to 10.10% on Friday. The SBP injected another PKR 101bn in funds into the market since Saturday bringing the Weekly
average to 11.69% slightly lower than the average of last week of 11.87%

Call rates however remained stable in the range of 12.80% while secondary yields on benchmark 6M T-bills came off significantly to 12.25%. PIBs meanwhile remained largely unmoved in the range of 12.51%. 6M KIBOR however remained frozen at 12.8% WoW. Liquidity is expected to remain tight in 2Q FY10 necessitating the intervention of the SBP at regular intervals; during the current week the SBP stepped in with a 7 Repo at 12.17%.


This week’s T-bill Auction saw a spike in bids up to PKR 93bn however the SBP accepted only PKR 25.3bn from participants. Enthusiasm titled in favour of the 1yr paper indicating the market was anticipating substantial cut in the policy rate of between 100-200bps. According to our estimates we expect the discount rate to loosen to 12% in the upcoming Monetary Policy Statement end Nov09. All tenors saw a marginal shedding on yields between 5-9bps however yields are expected to remain volatile in 2Q FY10 given the limited maturities of government securities and delays in external financing which could emerge.

Foreign Exchange Market
The USD traded in a band of 23 paisas during the week with trades commencing at PKR 83.75 and inching up to a low of PKR 83.80 before finally closing at PKR 83.57.

In forward trades, the shorter tenors remained the most active as banks remained short of USD liquidity due to SBP pickup. Earlier in the week, swap points for the shorter tenors 1W, 2W and 1mo stood at 17, 31 and 66 paisas and closed at 13.5, 27 and 64 paisas, respectively.

Longer tenors showed some stability through out the week with trades for 3mo paper stable at 203 paisas where as 6mo paper rose to 405 paisas and closed at 404 paisas.

The PKR:USD parity has been reflecting some stress derived from the country’s security concerns and political shakiness.

In the coming week shorter tenors may exhibit greater volatility whereas longer tenors are likely to reflect stability.