Govt raises Rs776bn via T-bills sales

KARACHI: The government raised Rs776 billion through the auction of Market Treasury Bills (MTBs) on Wednesday, slightly below the target of Rs800 billion.

The cut-off yield for the three-month T-bill decreased by 20 basis points (bps) to 13.7000 per cent. Meanwhile, the yield on the six-month T-bill remained unchanged at 13.4999 per cent, and the yield on the 12-month T-bill increased by 10bps to 13.1999 per cent.

Arif Habib Limited said in a note that “total bids amounting to Rs1,844 billion, 2.3x the target” indicate “ample market liquidity”.“Compared to the secondary market, the cut-off yields for the three-, six-, and 12-month T-bills were higher by 47bps, 36bps, and 17bps, respectively,” it added.

Analysts were anticipating a likely decline in yields across all tenors in the upcoming T-bills and Pakistan Investment Bonds (PIBs) auctions, following a historic rate cut by the State Bank of Pakistan (SBP) last week.

The SBP’s Monetary Policy Committee has reduced its key interest rate for the fourth consecutive meeting, lowering it by 250bps to 15 per cent. Since June, the SBP has lowered interest rates by 700bps over four straight cuts.

The SBP expects inflation to remain relatively low due to several favourable factors, including an improved supply of key food commodities, decreasing oil prices, and base effects. Pakistan’s headline inflation stood at 7.2 in October, compared with 6.9 per cent in the previous month.

The SBP forecasts that average inflation for FY25 will be below its earlier projected range of 11.5 per cent to 13.5 per cent. The exact inflation projection will be disclosed in January next year. Analysts expect inflation to be around 7.0 per cent to 8.0 per cent, while the IMF projects it to be 9.5 per cent for this fiscal year.

The SBP in a monetary policy statement noted a significant decline in net budgetary borrowing from the banking system, while at the same time, banks’ credit to the non-government sector has increased.

Following the receipt of profits from the SBP, the government has reduced its borrowing from banks and initiated buy-back operations for its outstanding debt securities.The government intends to raise Rs8.7 trillion by selling treasury bills and bonds from November to January to meet its budgetary needs and repay loans.