Kibor drops sharply after T-bills auction

May 30, 2024 (MLN): The Karachi Interbank Offered Rate (Kibor) dropped sharply on Thursday following the T-bills auction held yesterday.

The benchmark 6-month Karachi Interbank Bid and Offer rates dropped by 18 basis points (bps) to 20.08% and 21.07%.

The rates dropped across all tenors except one and two-week, with the three-month Kibor seeing the maximum decline of 25bps to 20.84% and 21.09%.

Yesterday's auction saw a fall in cutoff rates across all tenors, with the decline going as much as 60bps.

The market has renewed its bets for a rate cut by the State Bank of Pakistan (SBP), which has maintained the policy rate at 22% since June 2023, ahead of the upcoming monetary policy meeting.

The central bank is scheduled to meet on June 10, 2024, to announce its next decision. Moreover, headline inflation is expected to decelerate significantly to below 14% YoY in May 2024, pushing real interest rates above 8%.

"Ahead of the monetary policy announcement on June 10, 2024, the last scheduled T-bill auction witnessed a fall in cutoff rates across all tenors, said Shahid Ali Habib, CEO Arif Habib Limited (AHL).

"This decline reflects the market's expectation of a rate cut in the upcoming monetary policy, supported by low inflation, a narrowing current account deficit, and other economic indicators showing signs of recovery," he added.

Kibor is used as a benchmark for corporate lending rates. It is a market-determined average interest rate at which banks lend to one another in the interbank market.

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