0
KARACHI, July 19: The State Bank on Friday sold about Rs5.077 billion worth of long-term Pakistan Investment Bonds on premium and mopped up Rs5.275 billion from the inter-bank money market.
The SBP said in a statement the auction of the bonds generated Rs17.7 billion bids of which it picked up offers worth Rs5.077 only and rejected the rest. The central bank did so to stick to the pre-auction sale target of Rs5 billion.
The SBP said it realised Rs1.601 billion by selling three-year bonds and about Rs3.674 billion by selling five-year bonds. The central bank said the three-year bonds were sold at a cut-off price of Rs102.45 against Rs100 of face value of the scripless bonds.
It said the five-year bonds were sold at a cut-off price of Rs104.11 per Rs100.
“The sale of PIBs on premium shows the market is anticipating lower interest rates in future,” said treasurer of a foreign bank.
The three-year and five-year bonds carry a fixed coupon rate of 9 and 10 per cent respectively.
Senior bankers said the interest of the corporates in long term bonds was higher than in the past adding that most of the bids accepted were of corporate buyers and not of the banks.
Earlier this year the central bank had warned banks to refrain from amassing PIBs that were primarily launched for corporate funds.
INJECTION: Meanwhile, the State Bank on Friday injected Rs24 billion into the cash-strapped inter-bank money market through one-week reverse repo of treasury bills at its open market operation. The central bank said it conducted the reverse repo at 7.35 per cent.
The OMO had generated offers worth Rs28 billion of which the SBP picked up Rs24 billion and rejected the rest.
Bankers said the injection was made to offset the impact of Rs18 billion outflow from the market meaning that the net injection was of Rs6 billion. “But despite that the market had to discount by Rs4.74bn as banks were short of liquidity due to reserve averaging,” said a senior local banker.
Banks are supposed to keep mandatory cash reserves at 4 per cent of their total deposits on any given day with the condition that weekly average should not be less than 5 per cent. That is why they have to borrow funds on Fridays — the last working day for reserve averaging — if they have been keeping the reserves at 4 per cent.
