KARACHI, July 9: The volume of the special US dollar bonds in circulation shrank by $452 million in the outgoing fiscal year.

Senior bankers say the outstanding amount of bonds fell to $924 million at end-June 2002 from $1.376 billion at end-June 2001.

The $452 million worth of bonds encashed in the fiscal year 2001/02 include three-year, five-year and seven-year bonds but bankers say the maturity wise breakup of the encashed bonds is not available.

Bankers say the pace of encashment of dollar bonds picked up since October last year in the wake of the developments taking place after 9/11. They say that people started making faster encashment of these bonds also because of falling LIBOR (London inter-bank offered rates) as the rates of profit on these bonds are linked with LIBOR.

Some bankers say what else prompted people to redeem the US dollar bonds instead of rolling them over is that the bullish trend in the stock and real estate markets in the last fiscal year provided them with an opportunity of alternate investment.

The pace of encashment picked up after the events of September 11 2001 that eventually led to faster inflow of foreign exchange into Pakistan. This in turn brought the official and open market exchange rates at par.

As foreign exchange inflows picked up in the wake of September 11 events thereby eliminating the huge gap between official and open market exchange rates people stopped redeeming the bonds to buy dollars from kerb.