The federal government Wednesday borrowed over Rs 1 trillion through the auction for short-term government papers. Banks aggressively participated in the auction, conducted by the State Bank of Pakistan (SBP) on January 17, for the sale of 3-month, 6-month and 12-month Market Treasury Bills (MTBs). However, financial institutions were reluctant to invest in more than three months' papers and not a single bid was received for 6-month and 12-month MTBs in the auction held Wednesday.
As the received bids for three months were even higher than one trillion rupees, the federal government has successfully met its borrowing target. This is the second auction for T-bills in which no bid was received for 6-month and 12-month varieties. Earlier, in the first MTBs' auction held on January 3, 2018, no bid was received for 6-month and 12-month papers.
Analysts said with rising oil and commodity prices in the international market, banks are expecting that the State Bank of Pakistan may tighten the monetary policy in coming months. Therefore, they are avoiding long-term investment in government papers. According to SBP announcement, MTBs auction fetched bids amounting to Rs 1.118 trillion with a realized value of Rs 1.103 trillion against the target of Rs 975 billion set by the government for this auction. Out of the received bids, the federal government borrowed Rs 1.066 trillion (Rs 1.05 trillion realized value) at 5.9910 percent.
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