KARACHI: Cut-off yields on Treasury bills (T-bills) were raised significantly to 130 basis points on Wednesday.
Yields for all three maturities were raised just a day after the State Bank of Pakistan (SBP) left its benchmark rate unchanged at 9.75%.
Following the high-maturity amount, the government had set an auction target of Rs 1 trillion but could raise Rs 951 billion as it received total bids of 1.01 tr.
Experts said the banks were aware of the government requirements due to the amount at maturity of Rs1.11tr and played with higher offers which forced the government to increase the cut-off yields.
The objective of the auction was set taking into account the high amount of maturities
The cut-off yield for 12-month paper was increased by the highest 130 basis points to 12.30 bp during the auction. For three- and six-month paper, yields were increased by 96 basis points and 121 basis points to 11.45 bp and 12.10 bp, respectively.
The amount raised for three, six and 12 month Treasury bills was Rs 511.14 billion, Rs 255.8 billion and Rs 143 billion, respectively, while an additional Rs 41.53 billion was raised. been raised through non-competitive bids.
“This is an unexpected rise in Treasury yields just a day after SBP kept its policy rate unchanged. This clearly shows that the government is desperate and expects further tightening due to the rise. global commodity prices and fiscal slippages,” said Mohammad Sohail, CEO of Topline Securities.
Analysts believe that if the Russian-Ukrainian war continues, it could create serious imbalances for world economies, but Pakistan would suffer more than rich countries.
“Treasury yields rose during the auction as the amount of participation was close to target. Banks were reluctant to participate in existing yields and increased to hedge uncertainty in commodity markets which could affect interest rates and exchange rates in the future,” said Samiullah Tariq, head of research at Pak-Kuwait Investment and Development Company.
The SBP in its monetary policy statement indicated that rates could be revised upwards if the situation changes with a rise in global commodity prices.
OBLIGATIONS : The government has raised 114.46 billion rupees through auction of Pakistan investment bonds. It raised 30 billion rupees for two years and 82.25 billion rupees for three years. On top of that, Rs2.21bn was raised through non-competitive bids.
Posted in Dawn, March 10, 2022