Cut-Off Yield on Treasury Bills Drops by 68 BPS

The State Bank of Pakistan (SBP) has raised Rs. 729.29 billion in the auction of treasury bills (T-bills), with cut-off yield sliding by up to 68 basis points (bps).

According to the data released by the central bank, yesterday’s auction of T-bills had a substantial drop in the cut-off yield mainly due to an unchanged policy rate that was announced on 24 January. Interestingly, perhaps the biggest drop was observed in the flagship six-month paper as its yield slid by 68bps to 10.69 percent and the amount raised was Rs. 130 billion.

The three-month issue raised the most money at Rs. 489.28 billion despite a 15bps decline in the cut-off yield to 10.29 percent. On the other hand, the 12-month paper raised Rs. 110 billion, while its cut-off yield slid by 57bps to 10.92 percent.

Subsequent to Monday’s monetary policy decision, the rates on T-bills and Pakistan Investment Bonds (PIBs) fell dramatically in the secondary market the next day by 25 to 30 basis points.

The government collected Rs. 163.55 billion through PIBs, for which the sale was held the same day. It accepted Rs. 10 billion out of Rs. 17 billion in bids for the two-year investment bond, and garnered Rs. 153.55 billion out of Rs. 17 billion in offers for the three-year paper.

It also received non-competitive bids worth Rs. 1.425 billion, which took the total sum raised to Rs. 164.975 billion.

The all-inclusive analysis of the SBP data suggests that the government raised Rs. 729.28 billion against a target of Rs. 650 billion, with cumulative bids for the three papers totaling Rs. 2.259 trillion. It also received non-competitive bids of Rs. 95.352 billion, which brought the total sum generated to Rs. 824.6 billion.