Call rates jump on year-end liquidity tightness: Citi

Weighted average call money rates remained well below double digits for most of the year due mainly to the excess liquidity and central bank's continuous support through repo/reverse repo window. Deals settled between 4 percent and 7 percent range during the first three quarters of the year. However, increased seasonal demand ahead of Eid festivals during August and November led call money rates to hover around double digit levels. Higher government borrowing from the banking sector also created significant pressure in the money market during the last quarter of the year and the market remained very tight during the latter half of December. Central bank provided repo/reverse repo facilities in a very limited scale during this time which contributed to the tightness in the inter-bank money market. Most of the deals settled between 16 percent and 20 percent range during end part of December.

Yield curve flattens
Yields of government securities for most of the tenors marked modest rises over the year, with the longer tenor securities rising more significantly. The yields of shorter-end bills with 91-day, 182-day and 364-day tenor rose by 194 basis points (bps), 189 bps and 10 bps respectively. On the other hand, rates of mid and longer-end government bonds with 5 years, 10 years, 15 years and 20 years tenor increased by 40 points, 375 bps, 425 bps and 427 bps respectively. The increase in yield was the highest in the 91-day tenor bill which added 225 bps.