Govt Raises Rs. 275 Billion From T-bill Auction

The government has raised Rs. 275 billion after auctioning short-term government papers.

According to the data, the State Bank of Pakistan conducted the auction for the sale of 3-month, 6-month and 12-month Market Treasury Bills (MTBs) yesterday and received bids amounting to Rs. 1.113 trillion with a realized amount of Rs. 1.051 trillion.

• Bids worth Rs. 695.421 billion were received for 3-month T-bills while the government accepted bids amounting to Rs 170.385 billion for 3-month at 13.4694 percent
• Rs.148.097 billion for 6-month. However Rs. 22.347 billion were borrowed at 13.2890 percent against 6-month MTBs
• 12-month T-bills fetched bids amounting to Rs. 269.434 billion. Bids amounting to Rs. 82.032 billion were accepted against the sale of 12-month T-bills at 13.1340 percent

The federal government borrowed Rs. 274.764 billion (with a realized amount Rs. 258.805 billion) through the auction for MTBs held on Wednesday against a target of Rs. 400 billion.

According to the data, it was seen that investors were more interested in the short term three-month T-bills rather than the medium to long term ones as they are seeing possible cuts in the interest rate.

Osama Rizvi, an economic and geopolitical analyst, says:

The question here involves a trade-off. If the government keeps the policy rate high it will indeed bring in more “hot money”. But it comes with a cost. Our Large Scale Manufacturing sector has experienced a decline of almost 6 percent. Also, hot money isn’t sustainable, as the name indicates. We need investment in PIBS or FDI . The government might have opted going for a bond as investors are buying our reform story (indicated by the influx of hot money). I believe we should start bringing the interest rates down. Sequence and pace of a policy is very important and it is the right time to change both – as we now have some CAS and primary surplus too.