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Inflation & Monetary Affairs

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With the government counting on sovereign bond market and local commercial banks eyeing lucrative investment avenues, the second Treasury-bill auction of the fourth quarter was fairly well covered and successful. The amount of bids placed outstripped the auction target amount by 1.6 times. The government also accepted bids close to Rs233 billion, over and above the asked amount of Rs225 billion. The benchmark paper alone accounted for nearly three-fourth of the total participation level in the auction. On the other hand, tenders for the 3-month and 12-month papers amounted to Rs44 billion and Rs50 billion, respectively. In line with fundamentals and market-based forecasts, the poor participation level in 3-month paper is pointing to stable interest rate in the next few months. Market sentiments improved on account of slight respite in inflation, stability in rupee and improvement in overall balance of payment. Since a long term interest rate outlook is dicey at the moment, the ...

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  The cyclical upward movement in food inflation and the partial passing of the international oil price hike and its impact on other items pushed the consumer price index higher by 1.48 percent month-on-month during March. The CPI index had fallen 0.74 percent month-on-month in February. The high-base effect is playing its role as year-on-year inflation increased by 13.16 percent -- lower than the average of 14.59 percent for the first half of the fiscal year – taking the nine-month price hike to 14.2 percent. The high-base would also make April numbers modest despite the hike in fuel prices and its trickle down impact. The latest numbers are a little less than analysts’ forecast and the catch is in the change in the recording practice of petroleum prices. Previously, the FBS used to take the impact of change in petroleum prices in the preceding month i.e. fuel price revision for November used to ...
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  ‘We are not BBA students that we should be told about the elementary level definitions, calculation and importance of basic economic statistics frequently disseminated by government bodies,’ more than one middle management finance professionals complained about the “soporific presentations” at a recently held seminar organised by the central bank. But since the seminar – titled Contributions and Achievements of Official Statistics – was the first of its kind, perhaps the elementary level discussion, was rightly warranted.  In any case, the high level of participation – at least in the pre-lunch session – was quite remarkable, and shows the hunger for statistical clarity on the part of the users of these official numbers. And for these stats loving observers of business & economy there is going to be plenty of good news this year. The “rebasing of national accounts is due to be announced in two weeks time”, according to Asif Bajwa, Federal ...
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  It’s just not the high base effect. The volatility in the food items, especially perishable, and some apparent change in recording practices are doing the trick. Headline inflation registered an increase of 12.91 percent for February, well over a percentage point below the market expectations. The lack of market mechanism is visible in high volatility in prices of daily use food items like tomatoes and onions is making analysts work troublesome – perishable food index declined by 16.4 percent in a month’s time making the food index to down by 2.1 percent, yoy. The SPI data for last three weeks to be recorded in March CPI suggest that food index would increase 1.2-1-4, yoy in the coming month.   Interestingly, FBS data compilation has some discrepancies as well. The monthly average price for 53 essentials item summary for February over January is showing different results from index break up details. Moreover, CPI usually records ...
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  The fourth and the last round of T-bill auctions of the current year has begun, with the government aiming to sell a total of Rs1150 billion worth of papers from all seven treasury auctions scheduled to be held in the current quarter. Just like the previous treasury auctions, market participation in the first treasury auction of this quarter, held two days back, remained strong with bids 1.4 times the amount subscribed. However, the government sold around Rs200 billion worth of treasury papers, in line with the pre-auction target. In addition, it raised Rs25 billion through non-competitive bids given that around Rs237 billon worth of treasury bills were scheduled to mature yesterday. Unlike the auctions held in the previous quarters, what’s new this time is that 6-month papers remained the central figure. With fundamental factors pointing to a stable interest rate in the next few months, the benchmark paper attracted around half of the ...
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  Amid limited investment avenues for commercial banks and lucrative rates being offered by government papers, a high level of market participation in treasury auctions is inevitable. However, what’s new in recent treasury auctions is that the market demand for the 6-month paper has been mending. With market participation crossing Rs300 billion, the government sold around Rs174 billion worth of T-bills in the fifth T- bill auction of the quarter, held two days back, in keeping with a pre-auction target of Rs170 billion. The auction drew a bid to cover ratio of 1.76 as against average 1.54 for the past four auctions held since the start of the quarter. Driven by improved market sentiments regarding the key discount rate, which is expected to remain stable in the next monetary policy, the auction attracted around 36 percent of the participation (in terms of face value) in the 6-month paper, up from an average of 17 ...

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Banking Review 2011

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