KARACHI: Amid the high possibility of no further cuts in the interest rate, investors made a total of Rs2.207 trillion bids, mostly for the long-term tenors, with no change in the cut-off yields at the treasury bills (T-bills) and Pakistan Investment Bonds (PIBs) auctions on Wednesday.

Announcing the results of the auctions, the State Bank of Pakistan (SBP) reported that the government raised a total of Rs1.2tr, which reflected a change in investment patterns.

With the steep fall of the interest rate from 22 per cent to 12pc in the first seven months of FY25, the banks preferred to park their liquidity in long-term tenors while the government was also willing to raise cheaper money for an extended period.

The market found a balance between interest rates and investment over an extended period. The inflation fell to 1.5pc in February, and a further dip is possible in March. However, the State Bank expects a rise in inflation after March, so no more interest rate cuts look likely in the upcoming monetary policy.

Most of bids received for long-term tenors amid no change in yields

However, market experts are divided as some expect a 50 basis point cut in the Monetary Policy Committee’s meeting on March 10.

In the T-bills auction, the government raised Rs569bn against the target of Rs700bn, much lower than the maturity amount of Rs946bn.

Maturity means the amount of T-bills the government needs to pay back to the investors.

The bids for T-bills and PIBs were Rs1,237bn and Rs970bn, respectively.

The government raised the highest amount of Rs398bn for a three-month T-bill tenor at 11.82pc. It raised Rs49.3bn for six-month and Rs66bn for 12-month tenors at 11.67pc and 11.64pc.

In the case of PIBs, the government preferred to raise the highest amount for 10 years while it rejected bids for two years. An amount of Rs595bn was raised for 10-year PIBs while Rs25bn was raised for five years, totalling Rs629.3bn (including non-bidding amount).

Market experts said that despite the low interest rate, the banks still rely on the government’s borrowing to earn risk-free profits as they did in 2024. However, it was also observed that the government and the banks were waiting for the outcome of the talks with the IMF.

Published in Dawn, March 6th, 2025