KARACHI: The government raised over Rs869 billion through the treasury bills (T-bills) auction on Wednesday, though a meagre amount for the long-term Pakistan Investment Bonds (PIBs) was raised against the target.

The State Bank reported that bids for T-bills were Rs2.124 trillion but the government remained close to its target of Rs900bn. The highest amount raised was for the benchmark six-month T-bills while bids for 12-month papers were rejected.

The cut-off yields on three-month papers were slightly changed, not reflecting any major change in the coming weeks.

The highest bids were offered for three-month papers, but the government preferred to accept maximum amount for six-month T-bills.

The bids offered for three-, six- and 12-month T-bills were Rs1,226.9bn, Rs747.8bn and Rs150bn, respectively. The government raised Rs201bn for three-month and Rs593.6bn for six-month T-bills.

The cut-off yield on three-month papers was reduced by seven basis points to 7.47 per cent. The cut-off yield on six-month paper remained almost the same at 7.8pc.

The government also raised Rs74.5bn as non-competitive bids making the total amount raised through T-bills as Rs869.2bn.

The amount raised in the auction was closed to the maturing amount of Rs861bn reflecting the government’s cautious approach towards borrowing which has already damaged development spending. Domestic borrowing has already increased by 11.7pc during the 12 months from Feb FY20 to Feb FY21.

The PIB auction did not see the interest of the domestic investors as total bids offered were Rs10.55bn. The government raised only Rs4.4bn for two-year papers while bids offered for three-year papers were rejected. Total bids accepted including non-competitive bids were Rs5.317bn.

The bid pattern for PIBs indicate that domestic investors are expecting a change in the interest rate in a few months. This is against the inflow of foreign investment in the PIBs. During FY21, PIBs attracted about $240 million foreign investment, indicating that foreign interest has been revived in domestic bonds.

The government has set Rs125bn as the target for this auction while the maturing amount was Rs287bn. The next auction for PIBs would require higher amount to meet the deficit emerging from maturing amount.

Published in Dawn, April 8th, 2021