Despite another 100 basis point hike in the policy rate by the State Bank of Pakistan (SBP), the cut-off yields on treasury bills stayed unchanged as the government on Wednesday raised funds of Rs. 1.37 trillion through a fresh auction of treasury bills (T-Bills) against the target of Rs. 1.4 trillion and against the maturity of Rs 1.5 trillion.
The State Bank of Pakistan (SBP) carried out auctions of T-Bills and raised Rs. 805 billion through three-month treasury bills, Rs. 385 billion for six months and Rs. 95 billion from one-year bills.
The cut-off yields in all three tenures were hiked in the last auction on December 1, with the three-month papers seeing the largest increase of 229bps. The yields were nearly flat for all tenures in the most recent auction, with the three-month T-bills receiving the highest bids.
The cutoff yields on three months, six months, and one year remained unchanged at 10.79 percent, 11.50 percent, and 11.51 percent, respectively, according to the Central Bank.
The cutoff yields on T-Bills remained flat during the auction despite another 100 basis points hike in the policy rate by the SBP, making the total increase of 250bps to 9.75 percent within a short span of 25 days.
In extension, the government rejected all bids for Pakistan Investment Bonds for semi-annual auction while it raised Rs. 128 billion through quarterly auctions.
The rising interest rate is making borrowing costlier for the government and the private sector. The strategy for a higher interest rate is to counter the sharp increase in inflation. The next T-Bill auction is scheduled for December 29 to borrow Rs. 1.2 trillion against a maturity amount of Rs. 1.1 trillion.
