KIBOR plummets on policy rate decision
- Cut-off yield on three-month T-bills dropped by 120 basis points (bps) to 22.58 percent in the secondary market
KARACHI: The Karachi Interbank Offered Rate (KIBOR) dropped sharply on Friday following the State Bank of Pakistan’s (SBP) decision to maintain the policy rate at 22 percent.
KIBOR is the average interest rate at which banks want to lend money to other banks. The six-month KIBOR fell by 159 basis points (bps) to 23.09 percent. The three-month KIBOR decreased by 124 bps to 22.80, while the nine-month KIBOR declined by 157 bps to 23.43 percent. One-month KIBOR went down by 100 bps to 22.39 percent.
Against market expectations, the SBP kept the policy rate unchanged. The market was projecting an increase of 100-200 bps due to a higher inflation outlook.
Analysts at Arif Habib Limited (AHL) said that a significant decline was witnessed in all tenors of KIBOR after the SBP’s decision to maintain the policy rate at 22 percent.
Following the SBP’s monetary policy decision, the cut-off yield on three-month T-bills dropped by 120 basis points (bps) to 22.58 percent in the secondary market. Yields on six-month paper also fell by 139 bps to 22.91 percent, while yields on 12-month paper decreased by 147 bps to 22.96 percent, AHL reported.
The cut-off yield of long-term Pakistan Investment Bonds (PIBs) set at 19.63 percent, down by 98 bps. Five-year PIBs’ yield was reduced by 67 bps to 17.25 percent and 10-year long term investment bonds yield was declined by 35 bps to 16.22 percent. Lower KIBOR will help to improve the private sector credit off-take, analysts said.
Copyright Business Recorder, 2023
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