Following the State Bank of Pakistan’s (SBP) decision to keep the policy rate at 22 percent, the Karachi Interbank Offered Rate (KIBOR) fell substantially on Friday.
KIBOR is the average interest rate at which banks desire to lend to one another. KIBOR for the six-month period declined 159 basis points (bps) to 23.09 percent. The three-month KIBOR dropped 124 basis points to 22.80 percent, while the nine-month KIBOR declined 157 basis points to 23.43 percent. The one-month KIBOR fell by 100 basis points to 22.39 percent.
The SBP kept the policy rate steady, contrary to market projections. The market expected a 100-200 basis point hike due to a higher inflation outlook.
Analysts at Arif Habib Limited (AHL) reported a considerable drop in all tenors of KIBOR following the SBP’s decision to keep the policy rate at 22 percent.
Following the SBP’s monetary policy announcement, the cut-off yield on three-month T-bills in the secondary market fell by 120 basis points (bps) to 22.58 percent. rates on six-month paper declined 139 basis points to 22.91 percent, while rates on 12-month paper fell 147 basis points to 22.96 percent, according to AHL.
Long-term Pakistan Investment Bonds (PIBs) have a cut-off yield of 19.63 percent, a 98 basis point decrease. The yield on five-year PIBs was decreased by 67 basis points to 17.25 percent, and the yield on 10-year long-term investment bonds was reduced by 35 basis points to 16.22 percent. Analysts believe that lower KIBOR will contribute to improving private sector credit offtake.
