"KIBOR Hits 10-Month Low: T-Bill Yields Dip Below Policy Rate"

On January 12, 2024, in Karachi, the six-month interbank rate reached its lowest point in 10 months. This decline was driven by a sharp drop in treasury bill yields, suggesting a market anticipation of the central bank initiating interest rate cuts sooner than initially anticipated. The financial landscape reflects dynamic shifts, with implications for economic expectations and monetary policy.

The six-month Karachi Interbank Offered Rate (KIBOR), a crucial gauge for corporate lending, declined to 20.98 percent, marking its lowest point since March 2023, as reported by the State Bank of Pakistan (SBP). This shift follows a decrease from Wednesday's rate of 21.31 percent. The dip in KIBOR aligns with a substantial drop in the cut-off yields of treasury bills during an auction where the government successfully raised Rs284 billion, surpassing the original target of Rs100 billion.

All tenors, including three, six, and 12 months, exhibited yields below 21 percent, showcasing a notable deviation of over 100 basis points from the SBP's existing policy rate of 22 percent. The cut-off yields saw a significant reduction, ranging from 44 basis points (bps) to 59 bps, underscoring the evolving dynamics in the financial market.

The majority of the funds, amounting to approximately 10 percent of the total participation of Rs2.75 trillion, were secured in the 12-month tenor during the auction. This tenor exhibited both the highest participation and the lowest yield, standing at 20.59 percent, down by 59 basis points from the preceding auction. 

Simultaneously, the government successfully raised Rs161 billion through the auction of Pakistan Investment Bonds with floating rates, emphasizing tenors of five and 10 years. Mohammed Sohail, CEO of Topline Securities Limited, noted on the social media platform X that interest rates in Pakistan have now decreased by 4 percent (400 basis points). The evolving financial landscape reflects significant adjustments in response to market dynamics.

On January 12, 2024, Karachi witnessed a notable shift in its financial landscape as the six-month Karachi Interbank Offered Rate (KIBOR), a key indicator for corporate lending, reached its lowest point in 10 months at 20.98 percent, according to data from the State Bank of Pakistan (SBP). 

This marked a decline from the previous day's rate of 21.31 percent. The significant drop in KIBOR followed a sharp decrease in the cut-off yields of treasury bills during an auction where the government surpassed its initial target, raising Rs284 billion instead of Rs100 billion. Notably, the majority of the funds were secured in the 12-month tenor, which saw the highest participation and the lowest yield of 20.59 percent, down 59 basis points from the previous auction. 

This auction, where approximately 10 percent of the funds were successfully obtained out of a total participation of Rs2.75 trillion, signaled a deviation of over 100 basis points from the SBP's current policy rate of 22 percent. In addition, the government raised Rs161 billion through the auction of Pakistan Investment Bonds with floating rates, particularly focusing on tenors of five and 10 years. 

Mohammed Sohail, CEO of Topline Securities Limited, highlighted on the social media platform X that interest rates in Pakistan have now decreased by 4 percent (400 basis points), underscoring the evolving dynamics and adjustments in the country's financial market.