Treasury bills attract record foreign investment of $713m

Published November 15, 2019
Recent SBP data indicates investment in government-backed securities has become attractive for foreigners. — Reuters/File
Recent SBP data indicates investment in government-backed securities has become attractive for foreigners. — Reuters/File

KARACHI: Foreign investment in treasury bills reached a new high of $712.8 million in the first four months of this fiscal year.

The recent State Bank of Pakistan data indicates investment in government-backed securities has become attractive for foreigners. The financial sector believes that foreign investors’ growing interest in government papers reflects their confidence in the economic reforms being implemented in the country.

However, some researchers attribute this increased demand to the high yield of treasury bills. In the last auction of T-bills held on November 6, the cut-off yield for three and six-month securities were 13.28 per cent and 13.29pc, respectively.

According to them, foreign investment can’t get such a high return from any government backed almost risk free debt papers.

The treasury bills attracted $278.6m alone in the first 13 days of November but the investment was almost exclusively from two countries: the US and UK.

Highest investment from the US was $390.8m up to Nov 13 while the cumulative amount from UK amounted to $317.9m. Out of total net inflows of $712.8m, these two courtiers accounted for $708.7m.

Inflows from the United Arab Emirates during the period amounted to $19.5m while $8m came from Luxemburg.

In the first 13 days of November, investment from UK was $181.6m, US $88.7m and $8.8m from UAE.

While foreign investment boosted the morale of the equity market with the benchmark index going up, inflow of foreign investment helped the country to improve its foreign exchange reserves.

In a recent press conference, State Bank Governor Dr Reza Baqir rejected the perception that foreign investment in T-bills would fall once the interest rates go down. He said some investors might leave but they will return back when the economy achieves stability.

The recent foreign direct investment data revealed inflows falling by 3.1 per cent to $542m in the first quarter of FY20.

Published in Dawn, November 15th, 2019

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