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TRANSCRIPT
PRESENTED BY:Sarmad Samad
Azfer FirozKamran ShabbirHaris RehmanSarfaraz Junejo
MONEY MARKET
INTRODUCTION TO MONEY MARKET
1. TYPES OF MONEY MARKET
2. MONEY MARKET INSTRUMENTS
3. INVESTOR PREFERENCES FOR GOVERNEMNT SECURITIES
4. GOVERNMENT OF PAKISTAN DEBT AND INTEREST RATE LEVEL
INTERVIEWEES:
LAYOUT
The main purpose of money markets is to facilitate the transfer of funds.
Wholesale markets.
Money markets play a central role in the country’s financial system. They serve as the interface between the execution
of monetary policy and the national economies.
Serve public policy objectives:
1) financing public sector deficits
2) managing the accumulated government deficits
INTRODUCTION TO MONEY MARKETS
The structure and role of money markets can be influenced by:
-Financial deregulation
-International dimensions
Other functions of money markets:
-Fund raising;
-Cash management;
-Risk management;
-Speculation or position financing
INTRODUCTION TO MONEY MARKETS
Interbank market
-Market through which banks lend to each other and manage their reserve positions.
-Banks deal as funds buyer and seller
-The major characteristics of the interbank markets are:
-The transfer of immediately available funds
-Short time horizons
-Unsecured transfers
-Interbank interest rates and interest rates in the traditional market are interconnected
-Interbank rate is determined entirely by the supply and demand of banks for funds.
DIFFERENT SEGMENTS OF MONEY MARKET
Primary market
-The securities are issued via a regularly scheduled auction process
-Competitive bids
-Non-competitive bids
Secondary market
-Active and liquid
-On-the-run issues.
Derivatives market
DIFFERENT SEGMENTS OF MONEY MARKET
Government Securities:
1) Treasury Bills
2) Pakistan Investment Bond
Repurchase Agreements (Repo and Reverse Repo)
Call and Clean Lending
MONEY MARKET INSTRUMENTS
Treasury Bills:-short term and highly liquid
-issued and backed by government no default risk
-form the benchmark default-free interest rates
-issued at a discount to their par or nominal value.
-sold to finance government budget deficit requirements.
-Government of Pakistan Market Treasury Bills (MTBs):-competitive bidding process
-interest is the difference between the purchase price of the security and what you get at maturity
- different maturities.-Minimum Denomination
MONEY MARKET INSTRUMENTS
Pakistan Investment Bonds:
-long term bonds
-sold through the State Bank of Pakistan via periodic auctions
-different tenors
-risk free investment at premium interest rates
-fixed semiannual coupon and repayment of principal at maturity
-Statutory Liquidity Requirement (SLR) eligible securities
-the minimum denomination of PIBs is Rs.100, 000.
-June 1998 the government stopped issuing Federal Investment Bonds.
-March 2000 ban on National Saving Schemes (NSS) changed the situation.
MONEY MARKET INSTRUMENTS
PAKISTAN REVALUATION RATE
0-7
8-1
5
16-
30
31-
60
61-
90
91-
120
121
-180
181
-270
271
-365
2 Y
EARS
3 Y
EARS
4 Y
EARS
5 Y
EARS5
6 Y
EARS
7 Y
EARS
8 Y
EARS
9 Y
EARS
10
YEARS
15
YEARS
20
YEARS
30
YEARS
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
PKRV
PKRV
continuous growth investors’ perception
Call and Clean Lending:-determination of KIBOR-call market in Pakistan is less developed Repurchase Agreements:1) REPO:-loan backed by securities-two legged transaction-may involve government securities, commercial papers and certificates of deposit. -short term2) Reverse REPO:-purchase of securities by one party from another with the agreement to sell them -to borrow securities and to lend cash
MONEY MARKET INSTRUMENTS
Guaranteed Repayment
Investment For Short Term
Higher Returns as compared to bank deposits
Accepted as Collateral
Liquidity
Easy Process of Investment
INVESTORS’ PREFERENCES FOR GOVERNMENT
SECURITIES
June 30th 2013 Public debt recorded at Rs.14,366 billionAttributed to financing of fiscal deficit (8 percent of GDP )
Pakistan’s domestic debt comprises of permanent debt, floating debt and unfunded debt.
Government borrowings from domestic sources were actually higher than the overall fiscal deficit in 2012-13 as
net external debt had to be paid.In 2012-13, the floating debt increased by Rs.1,053 billion.
In 2012-13, the floating debt increased by Rs.1,053 billion. The domestic debt increased by Rs.1,880 billion in 2012-13 as compared to last year and recorded at Rs.9,517 billion constituting 41 percent of GDP and 66 percent of the total
public debt in 2012-13 as shown in the next slide.
GOVERNMENT OF PAKISTAN DEBT