The yields of short-term government papers declined up to 31 basis points (bps) in the auction held Wednesday. Analysts said that the downward trend in margin of Market Treasury Bills is mainly due to expected cut in interest rate in coming monetary policy.
The State Bank of Pakistan (SBP), on September 11, 2019, conducted the auction for the sale of 3-, 6- and 12-month Market Treasury Bills (MTBs) and received bids amounting to Rs 1.649 trillion with a realized value of Rs 1.461 trillion. The received bids were much higher than the actual target of Rs 600 billion, which included Rs 572.5 billion of maturing amount and Rs 27.4 billion additional amount.
As the market is expecting a slight cut in the key policy rate in coming monetary policy, banks preferred to go for 12-month T-bills. Some Rs 101 billion worth bids were received for 3-month, Rs 92.5 billion for 6-month and some Rs 1.455 trillion worth bids were submitted for 12-month T-bills.
Out of the received bids, the federal government accepted bids amounting to Rs 467.452 billion with a realized amount of Rs 419.2 billion. The borrowed amount is less than the actual target of Rs 600 billion set by the government for this auction.
The cut-off yield of 3-month MTBs set at 13.7397 percent down from 13.7499 percent with accepted amount of Rs 52.352 billion. Bids amounting to Rs 65 billion were accepted for 6-month T-bills and its cut-off yield was set at 13.9291 percent, down 1 bps.
Similarly, the cut-off yield of 12-month MTBs declined by 31 bps to 13.9300 percent for borrowing of Rs 350 billion. Analysts at Arif Habib said that in this treasury bills auction, the cut off yields for 12-month T-bill declined by 31 bps as changes in CPI calculation methodology along with decline in projected inflation has created room for a cut in discount rate by 25 bps in the upcoming monetary policy to be announced during this month. In addition, 10-year Pakistan Investment Bonds' yield has already declined by 138 bps to 12.48 percent, analysts added.
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