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Cut-off yield on six-month treasury bills reduced further

KARACHI (January 09 2003) : The cut-off yield on 6-month Treasury Bills has been further reduced by 50 basis points, giving signals for lowering of interest rate which might channelise more liquidity towards stocks business.

The State Bank on Wednesday held auction of 6-month T-bills and realised Rs 33.164 billion.

Money market experts said this huge liquidity was picked up in the wake of inflow of Rs 37 billion T-bills maturity due on Thursday.

The cut-off yield on 6-month T-bills was 4.45 percent per annum in the last auction, but it dropped to 3.95 percent, a reduction of 50 basis points.

The market was expecting a drop of 20 to 25 basis points in the cut-off yield. The market received it as a signal from the State Bank for continuity of lowering or stable interest rate.

The banks offered a total amount of Rs 59.039 billion for the T-bills and market experts said that most of the bids were well below 4 percent.

In the interbank money market, the 6-month T-bills were traded at 3.7 percent per annum.

The impact of cuts in the discount rate, treasury bills, Pakistan Investment Bonds had direct impact on the stocks business where the better yield attracted huge liquidity and the KSE-I00 index jumped by 112 percent from January 2002, to January 2003.

“Government papers have lost attraction, as the returns have gradually gone down and the depositors are not getting any satisfactory return, which pushed them towards the stock trading for a better return,” said a money market expert.

As a consequence of lower interest rate, the yield on PIBs also dropped significantly.

The yield on 10 years, 5 years and 3 years were 5.1-5.2 percent, 4.6-4.7 percent and 4.3-4.4 percent, respectively.

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