1. EXCHANGE & DEBT MANAGEMENT DEPARTMENT USERS-PRODUCERS WORKSHOP State Bank of Pakistan Karachi. May 08, 2006 Muhammad Arif Joint Director – Money & Debt Markets Exchange & Debt Management Department “Interest Rates” Data Compilation and Dissemination

2. EXCHANGE & DEBT MANAGEMENT DEPARTMENT Interest Rate DEFINED  Theoratically, interest rate is the cost of holding the Money (shortly it’s the opportunity cost of capital).  Practically, from the Money Market perspective, it’s the rate at which borrowers are willing to borrow or lenders are willing to lend funds. CHARACTERISTICS  Tenor – term to maturity  Rate of Return  Principal

3. EXCHANGE & DEBT MANAGEMENT DEPARTMENT Types TYPES OF DATA SOURCES  3 day Repo Rate (Announced by SBP)  Primary Market Data (Auction data given by SBP)  Benchmark Rates (established by Money Market)  Data on Secondary Market Activities (provided by SBP) SBP prepares, maintains and disseminates data pertaining to both the Primary and Secondary Market.

4. EXCHANGE & DEBT MANAGEMENT DEPARTMENT Auction Data PRIMARY RATES  Determined through auctions of MTBs and Pips  Reflect Monetary Policy stance of the central bank (State Bank).  MTBs –Auctions are conducted fortnightly, results are updated on SBP website, Reuters and disseminated through print and electronic media. –Available tenors are i.e. 3, 6 & 12 month MTBs  PIBs –Auction schedule is announced annually and auctions are conducted quarterly. –Initially launched in three tenors i.e. 3, 5 & 10 year semiannual coupon bonds. –15 & 20 year bonds were issued in May 2004 to extend the benchmark yield curve to 20 years and cater the demand of housing finance sector, pension funds.

5. EXCHANGE & DEBT MANAGEMENT DEPARTMENT DISCOUNT RATE (DR)  3-day Repo Rate (or DR) is the rate at which Discount Window operations are conducted i.e. SBP provides overnight liquidity to banks in case of shortage of funds, as a last resort.  It’s a key policy rate. SBP changes it to give medium term Monetary Policy signal.  Frequency of change is as and when required.  Complete history is available at SBP website.

6. EXCHANGE & DEBT MANAGEMENT DEPARTMENT MTB Cutoff & DR Trend

7. EXCHANGE & DEBT MANAGEMENT DEPARTMENT SECONDARY MARKET BENCHMARK RATES KIBOR  Karachi Interbank Offered Rate (KIBOR); quoted on Reuters by 20 commercial banks (as selected by FMA - Financial Markets Association of Pakistan).  Updated at 11.30 AM daily on Reuters by excluding Out-layers, 4 extremes on higher and 4 extremes on lower side.  Authenticity is confirmed by making the contributors liable to accept Bid/Offer within 15 minutes from the time of up date up to Rs 100million of Lot Size by Contributor Banks.  FMA ensures timely and error-free availability of the rates.  With effect from 31st January 2004 Karachi Interbank Offered Rate (KIBOR) is used as the benchmark for all corporate lending.  Currently KIBOR is quoted for tenors ranging from 1-week to 3-years.

8. EXCHANGE & DEBT MANAGEMENT DEPARTMENT SECONDARY MARKET BENCHMARK RATES-KIBOR  SBP website maintains historical data (also available on FMA website http://fma.com.pk/)

9. EXCHANGE & DEBT MANAGEMENT DEPARTMENT SECONDARY MARKET BENCHMARK RATES-KIBOR

10. EXCHANGE & DEBT MANAGEMENT DEPARTMENT SECONDARY MARKET BENCHMARK RATES PKRV  Benchmark curve used for revaluation of Government securities  Rates contributed by money market brokers on daily basis.  Regulated by FMA and updated daily on Reuters.  Rates available from Overnight to 20-years.

11. EXCHANGE & DEBT MANAGEMENT DEPARTMENT SECONDARY MARKET BENCHMARK RATES – PKRV

12. EXCHANGE & DEBT MANAGEMENT DEPARTMENT SECONDARY MARKET DATA  Apart from the data on auctions & KIBOR, SBP website also maintains & updates data pertaining to secondary market activities.  This includes: oSecondary market transactions in Govt. Securities among Commercial banks/PDs and with non-banks i.e. Out right and Repo with volume and rates tenor wise. oDaily lending volume in call Money Market with rates tenor wise.

13. EXCHANGE & DEBT MANAGEMENT DEPARTMENT SNAPSHOT Data TypeFrequencyHistory (SBP)History (FMA) MTB AuctionFortnightlyComplete- PIB AuctionQuarterlyComplete- Discount RateAs & whenComplete- KIBORDailyComplete PKRVDaily-Complete

14. EXCHANGE & DEBT MANAGEMENT DEPARTMENT Other Rates  Available on Reuters.  Frequency is daily 1.PKIB Curve. Contributed by Primary Dealers. Represent rates of PIB’s issue wise. 2.Sukuk contributors Pricing. Contributed by the lead managers and one Islamic bank i.e. Meezan Bank of first GOP guaranteed Islamic instrument viz.Wapda Sukuk. 3.TFC Revaluation Curve. Contributed by FMA Selected Brokerage Houses. Represents TFC pricing in the Secondary Market

15. EXCHANGE & DEBT MANAGEMENT DEPARTMENT FUTURE PLANS SBP plans to make its website more meaningful and helpful for its users on the subject. In this regard data pertaining to SBP and Secondary Market activities will be uploaded on the website. Current plans are to make available to public following data;  Data pertaining to Open Market Operations with cut offs and volume accepted.  Tenor-wise data on Call and Repo Market with volumes, min. & max rates and weighted average rates.  Historical data on Discount Rate and Discounting

16. EXCHANGE & DEBT MANAGEMENT DEPARTMENT THANK YOU