August 09, 2024 (MLN): The benchmark 6-month Karachi Interbank Offered Rate (KIBOR) dropped sharply by 52bps over the past three trading sessions on strengthened expectations of further cuts by the central bank.
The bid and offer rates for the 6-month KIBOR stood at 18.58% and 18.83%, respectively, compared to 19.10% and 19.35% on August 6, 2024.
The majority of the decline in secondary market yields was triggered after Wednesday’s T-Bills auction, wherein SBP received bids worth Rs1.78tr, and the accepted amount stood at just Rs355bn.
Meanwhile, yields across all tenors witnessed a drop of up to 54bps.
Furthermore, in a meeting held about two weeks ago, the central bank eased the policy rate by another 100 basis points to 19.5% in line with the market expectations.
The reduction was the second in a row, bringing the total decrease since June 2024 to 250bps.
What further strengthens a mindset of additional cuts is the inflation figure for July, which clocked in at 11.1% YoY, cooler than market's expectations.
As of now, the real interest rates stand at 8.41%, the highest in the region.
Recently, the All-Pakistan Textile Mills Association (APTMA) has also called for an immediate need to cut interest rates further to ease the cost of borrowing and encourage growth in the country.
According to the advance calendar of MPC meetings for the second half of 2024, the central bank is scheduled to meet next on September 12, 2024, to decide on the policy rate.
