KARACHI: The government failed to mobilise banks for borrowing through market treasury bills as it received bids about half the target it set for the auction on Wednesday.

Banks adopted a cautious approach anticipating that the interest rate scenario may change in the next auction. The State Bank accepted almost all amounts offered for t-bills.

The banks offered Rs291 billion for the three categories of t-bills and the State Bank accepted the same amount.

Banks invested Rs150bn for 12-month t-bills, Rs78bn for six months and Rs62bn for three months with the cut-off yield as 9.99 per cent, 9.97pc and 9.95pc respectively.

The government had set Rs500bn target but it could borrow just Rs291bn. The maturing amount of the previous t-bills is about Rs645bn which means the government requires Rs354bn to meet this gap.

So far the government was reluctant to rely on floating debt (mostly t-bills) as it kept the State Bank under pressure for most of its borrowing.

Market experts said investors are more interested in long term bonds compared to short term treasury bills in an anticipation of a possible rate cut in the next monetary policy.

Banks invested historically huge investment of Rs530bn in the Pakistan Investment Bonds in the auction held on March 26 reflecting banks strategy to get higher returns from long-term investment. The strategy also reflected on Wednesday when out of Rs291bn investment, Rs150bn were invested for 12-month t-bills.

“The inflation indices are indicating that the main inflation (CPI) could witness a slight increase this month giving hopes of a cut in the discount rate in the next monetary policy review due next month,” said S S Iqbal, Fund Manager at an asset-based company.

He said the banks kept their liquidity for the next PIBs auction which is scheduled to be held on April 24.

“Even if discount rate (policy interest rate) is kept unchanged, investment in PIBs is profitable and secured,” he added.

The cut-off yield for three-year PIBs is 12.09pc, for five-year 12.55pc and for 10-year 12.9pc.

If the interest rate declines investment in PIBs could earn attractive profit for investors. The target for auction of PIBs during the 4th quarter is Rs300bn.