A shut-off from the State Bank of Pakistan not to lend to the Federal government for budgetary support resulted in throwing overboard its Treasury Bills target of Rs 15 billion, and scurrying to raise a whopping Rs 95 billion from the banks. On Wednesday, the last auction for 3-, 6- and 12- month papers, in the current quarter was held. Bids of face value of Rs 125 billion were offered on a realised amount of Rs 119 billion.
The Debt Management Division of the Ministry of Finance raised the cut-off yield by slight 6 to 8 basis points (bps) over the previous auction to make the calendar of targets of T-Bills amounts meaningless. The cut-off on three months went up from 13.1997 to 13.2542; for six months from 13.4032 to 13.4613; and on 12 months 13.6973 to 13.7775.
SBP may have agreed to a one-off violation of the target as the government was faced with a payback of Rs 70 billion on maturing T-bills, plus interest, said Asad Rizvi of CMKA. But, in the next quarter, SBP and MoF would need to adhere to the auction target with 10 percent allowance, above and below the target, he added.
Further, he said, the difference between SBP's policy rate of 14 percent and government T-bills yield is now less than 50bps. This is indicative that SBP would be further enhancing its rate in the next monetary move, in January 2011. Caught in a political turmoil, the government has failed to either raise revenue, or cut expenditure - as a result the budgetary deficit has crossed 7.5 percent. The consequence for this is expected to hit hard after a time-lag of six months, coupled with high oil prices - inflation could easily cross 15 percent, say knowledgeable sources.
A press communiqué issued by the Domestic Markets and Monetary Management Department of SBP says: Tenders for Sale of 3-month, 6-month and 12-month government of Pakistan Market Treasury Bills were invited by the State Bank of Pakistan, Karachi, through Primary Dealers from December 28 to December 29, 2010. Bids were opened at 11:30 hours on December 29, 2010 which were received as follows:
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(Rs In Millions)
Realized Value Face Value
03-Month 82,352.008 84,857.500
06-Month 25,435.333 27,142.000
12-Months 11,430.350 13,000.000
Total 119,217.691 124,999.500
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Out of the above bids, the accepted bids are as under:
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Maturity Cut - Off Weighted Realized Face
Period Yield Avg. Yield Amount Value
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03-Month 13.2542 13.2032 70,611.928 72,757.500
06-Month 13.4613 13.4073 16,161.553 17,242.000
12-Months 13.7775 13.7250 8,356.250 9,500.000
Total 95,129.731 99,499.500
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