KARACHI: The government on Wednesday raisedRs575.3 billion through the auction of treasury bills (T-bills). The rate was slightly changed from the previous auction held on May 5.

Banks with surplus liquidity showed their eagerness to park over one trillion rupees in government papers. However, the government accepted about 50 per cent amount offered by the investors.

Since the cut-off yields on all papers were almost unchanged, bankers believe it to be a sign of a stable interest rate. Financial circles have been waiting to see a positive change in the interest rate but the State Bank looks unmoved. Increasing inflation has put pressure on the SBP to change the interest rate in the upward direction.

However, growth has been given first chance to improve. The latest data of LSM showed 8.99pc growth during the first nine months of the current fiscal year (9MFY21). However, higher interest rates could hurt growth. The SBP is sticking to 3pc economic growth rate for FY21 while the International Monetary Fund and World Bank see half of the estimate given by the central bank.

The only change was noted in the cut-off yield of six-months T-bills which increased by 5 basis points to 7.60pc. The government raised highest amount of Rs325.5bn through the auction of six-month T-bills. The bids for the same paper were also highest at Rs552.5bn.

The government raised Rs179.8bn for the three-months T-bills at 7.34pc. The rate was unchanged from the last auction of May 5. The bids for this paper were Rs453.9bn.

The lowest amount was raised for 12-month papers at a rate of 7.68pc. The bids for this paper were also lowest — signifying that long term investment could face a challenge if the interest rate is increased during this period. The government raised Rs21.6bn for this tenor.

The government also raised Rs48.4bn through non-competitive bids making the total selling of T-bills at Rs575.3bn.

The long-term Pakistan Investment Bonds (PIBs) were also sold in the auction and the government raised Rs20bn for two-years PIBs while it rejected bids for three-years PIBs. In addition to it, Rs1.064bn was also raised through non-competitive bids making the total as Rs21.064bn.

Published in Dawn, May 20th, 2021