The money market is likely to stay liquid during the week as the State Bank of Pakistan (SBP) mopped up a small amount from three-month and one-year treasury bills auction against the maturity of Rs 85 billion. According to a report of Finex Securities, the market is likely to remain liquid with a net inflow of around Rs 45 billion last week.
The brokerage house expects lending pressure in all tenors maturing before the year-end. Buying pressure should continue in treasury bills, as a result of which rates are expected to stay on the lower side.
Bond market is also expected to remain at existing levels, with chances for a slight upside movement.
The interbank market was characterised by surplus liquidity, resulting in rates easing towards the end of the week. Initially, overnight trades were conducted at as high as 7.40 percent.
Rates gradually came down to close the week below 1.00 percent. One- and two-week tenors started the week on the higher side ie in a band of 5.75 percent and 3.75 percent but eventually eased off to end at around 1.00 percent.
Similar trend was seen in the one- and three-month tenors where deals, after being executed at 3.20 percent and 3.00 percent, closed at 2.25 percent and 2.70 percent, respectively.
The SBP conducted three-month and one-year treasury bills auction with a target amount of Rs 60 billion. Participation was low, at Rs 41.25 billion, due to the quarter-end. SBP accepted Rs 17.45 billion for the three-month at a cut-off yield of 2.9750 percent, ie 31 basis points higher than the previous cut-off of 2.6669 percent.
All bids received in the one-year paper were rejected by the SBP.
To mop up excess liquidity, the SBP conducted open market operation and accepted Rs 3.9 billion at 2 percent against a participation of Rs 13 billion.
The latest three-month treasury bills saw buying interest at 2.70 percent but little was executed. Similarly, one-year paper also saw buying interest at 3.75 percent but no major transactions were finalised.
In the bond market, rate declined modestly compared to the previous week. Bids and offers for the 10-year bond ranged between 8.50 percent and 8.45 percent where some trades were concluded. Short-dated bonds, particularly the June 18, 2002, three- and five-year issues were active. In the three-year paper, offers were available at 3.75 percent, while offers in the five-year paper were 5.10 percent.