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Cut-off Yield on T-Bills Increased By Up To 49 Basis Points

The government raised Rs. 731 billion in a treasury bills auction held, in which cut-off yields on treasury bills were increased by up to 49 basis points.

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While the government’s target was to raise Rs. 800 billion, it managed to earn Rs. 731 billion against total bids worth Rs. 1,171 billion.

The increase in yields by up to 49 basis points was the largest in the past fifteen months.

Out of bids of Rs. 1,171 billion, investors offered a total of Rs. 842.3 billion for three-month treasury bills (T-bills), which indicated that they expect the State Bank of Pakistan’s (SBP) to further increase the policy rate in the next few months.

The government raised Rs. 689.8 billion for three-month T-bills at a rate of 7.64 percent, against a target of Rs. 200 billion, as compared to a rate of 7.23 percent in the last auction held on 8 September.

In addition, the government earned Rs. 41.1 billion on six-month T-bills against total bids worth Rs. 231.1 billion, after yields, increased by 49 basis points.

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Meanwhile, it rejected bids worth Rs. 97.5 billion for 12-month papers, against a target of Rs. 300 billion.

The government also raised Rs. 72.8 billion by auctioning off Pakistan Investment Bonds (PIBs). It raised Rs. 3 billion for two-year bonds, and Rs. 72.05 billion for three-year bonds.

The SBP raised its policy rate by 25 basis points to 7.5 percent last week and said that it was prepared to adjust the rate further if needed.

In early 2020, when the COVID-19 pandemic first hit, the central bank slashed the rate to 7 percent from 13.25 percent.

It cut rates to bolster the economy amid the pandemic’s recessionary effects but said that now that Pakistan has made an economic recovery, it wanted to shift focus toward sustaining economic growth instead of accelerating it further.

This change in the SBP’s monetary policy objective comes amid surging imports, a rise in the country’s current account deficit, and Pakistani rupee depreciation.

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