Market Performance

The money market remained volatile during the month where overnight REPO rates remained on the higher side for most of the month. The central bank remained active and carried out OMOs  during the month. The SBP raised Rs 229bn through T-bill auctions in July against Rs 175bn of maturity while the cut off yields in the last auction remained unchanged across the board. At the end of the month, the central bank surprised the market by increasing the policy rate by 50bps.

Fund Performance

The fund recorded a return of 7.63% per annum for the month ended. The allocations remained pretty much the same as compared to the last month and no new exposure was taken in longer term debt  instruments. The fund will continue to reduce its debt portfolio and replace it with short term cash placements.

Future Outlook

The country’s consistently high fiscal deficit has become a major challenge as the government is financing itself either by borrowing from the commercial banks (which is crowding out the private sector) or from SBP (which is keeping inflation higher). As these problems are expected to remain intact in the short term, we expect the interest rates to remain on higher side.