KARACHI: The government has further slashed the returns on treasury bills (T-bills) by up to 66 basis points in the auction held on Wednesday.

However, the banking liquidity was more visible as bids for T-bills and Pakistan Investment Bonds (PIBs) reached Rs3.75 trillion. The bids for T-bills and PIBs were Rs2.493tr and 1.264tr, respectively.

According to the State Bank of Pakistan (SBP), the government raised Rs616bn through T-bills and Rs613.4bn through PIBs, making the total Rs1.229tr.

Financial market experts said that the cut in T-bill rates was expected due to a downward trajectory in the SBP policy rate with a sharp deceleration in inflation, while the Karachi Inter-Bank Offered Rate was also below 13pc.

The cut-off yield on three-month T-bills was reduced by 46 basis points to 12.99pc, six-month by 53bps to 12.89pc and 12-month papers by 66bps to 12.35pc.

The highest bids were for 12-month papers, which reached Rs1.276tr, while six-month T-bills attracted Rs566bn, and three-month bills Rs651.6bn. The bids for 10-year papers were Rs1.097tr.

The government accepted Rs121bn for three months, Rs54bn for six months, and Rs305bn for 12 months, reflecting the government’s strategy to increase the long-term debts. The government also accepted Rs136bn as the non-bid amount, which collectively raised the total amount the government raised at Rs616bn.

Financial experts say the market expects another cut in the benchmark policy rate of 100 to 150bps in the next monetary policy review, provided the inflation remains around 7-8pc. They said the real interest rate is still positive as the current policy rate stood at 15pc.

The banks were eager to park their maximum liquidity for the long term.

The government raised Rs11.5bn for 5-year PIBs and Rs619.9bn for 10 years.

Bankers said the government will raise more money in the coming days. The FBR reported a Rs180bn shortfall, but a few independent economists put it Rs400bn. However, the banks were also eager to dispose of their liquidity to avoid incremental tax on Advance to Deposit Ratio (ADR). The bank advances increased sharply during the last couple of months.

Published in Dawn, November 28th, 2024