KARACHI: The government slashed treasury bill rates by up to 62 basis points in the auction held on Wednesday, but the amount raised fell short of the target.

According to data released by the State Bank of Pakistan, the auction attracted Rs1.121 trillion from investors, but the government remained below the Rs225 billion target, raising only Rs184.6bn.

A significant change occurred in the cut-off yields, which were reduced for all tenors. The three-month T-bill rate was cut by 50 basis points to 20.49 per cent, down from the previous yield of 20.99pc. The government raised Rs8bn against bids of Rs446.5bn.

The benchmark six-month T-bill rate saw a reduction of 56 basis points to 20.4pc, compared to 20.96pc in the previous auction held on January 10. The amount raised for this tenor was Rs2.6bn against bids of Rs62.9bn.

Govt borrows less at PSX to maintain Sukuk rates

The highest amount was raised for the 12-month papers, but the cut-off yields noted the most significant slash, decreasing to 20.22pc, down from 20.84pc, reflecting a decline of 62 basis points. The amount raised was Rs91.5bn against the bids of Rs611.9bn.

The big cut in the T-bills rates was against the market expectations. The market believes that the policy interest rate will not come down in the next monetary policy scheduled on January 29.

Due to high inflation of 29.7pc in December and the IMF’s high expectations of a significant decline in inflation, pressure has built up to maintain the interest rate at the current level of 22pc to counter high inflation. The money market also reported that the Karachi Inter-Bank Offered Rate (Kibor) has started increasing. Now the money market expects no change in the policy interest rate.

The total bids for this auction were less than the bids offered in the previous auction. The total bids for this auction were Rs1.121tr compared to Rs2.75tr in the previous auction on January 10.

Sukuk auction

Stock market experts said the government smartly borrowed a slightly lesser amount to maintain yields in the latest Sukuk auction at the Pakistan Stock Exchange.

For the Rs100bn target, investors offered an amount close to Rs500bn. Many offers were at higher yields amid expectations of a delay in the rate cut.

However, the government picked Rs87bn and kept the rates near the last auction. The one-year Sukuk cut-off yield came to 19.49pc, down from 19.51pc in the last auction. Similarly, the three-year Sukuk cut-off was 16.05pc, while the five-year was at 15.49pc.

Published in Dawn, January 25th, 2024