Analysts said the 3-month T-bills rate was 76 basis points below the discount rate, which is a sign that a cut in policy rate is in pipeline. - File photo

KARACHI: Substantial cuts were introduced in the rates of Treasury Bills on Wednesday suggesting that the interest rate may see a slash in upcoming monetary policy review on October 8.

The auction of T-bills also showed the banks’ eagerness to invest in government papers as they offered Rs436 billion but the State Bank raised Rs177 billion.

The highest investment was made in 12-month T-bills reflecting the investors’ confidence on prevailing interest rate scenario that speaks for possible fall in coming weeks.

The cut-off yield for one year tenure was slashed by 48 basis points to 12.83 per cent from 13.31 per cent. The amount raised for this tenure was Rs109 billion.

The benchmark 6-month T-bills also witnessed a big slash of 46 basis points and an amount of Rs64 billion was raised with a cut-off yield 12.77 per cent.

The State Bank raised Rs4 billion for 3-month t-bills at rate of 12.74 per cent, a cut of 32 basis points.

Analysts said the 3-month T-bills rate was 76 basis points below the discount rate, which is a sign that a cut in policy rate is in pipeline.

Market experts had already indicated that the T-bills rates would see a significant reduction since the inflation was coming down and the policymakers find it easy to introduce a lower policy interest rate. The State Bank had introduced a cut of 50 basis points in the discount rate in the previous monetary policy announcement for August-September.

Updated Oct 05, 2011 07:16pm

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