The federal government on Wednesday borrowed some Rs 348 billion through auction of Pakistan Market Treasury Bills (MTBs) against the target of Rs 450 billion. Analysts said banks and other financial institutions are more interested in long-term papers - Pakistan Investment Bonds (PIBs) -compared to MTBs as they are getting a better cut-off yield in long-term bonds.
They said below the target bids and acceptance of all bids showed that the government still needs some financial support from the domestic banking system despite massive foreign inflows. The State Bank of Pakistan conducted the MTBs auction on May 14, 2014 for the sale of 3-month, 6-month and 12-month and received bids worth Rs 371.312 billion with a realised value of Rs 348.085 billion.
Most of the bids were received for 12-month period as banks and other financial institutions are expecting some decline in key policy rate to be announced on Saturday. The received bids included Rs 77.514 billion for 3-month, Rs 110.263 billion for 6-month and Rs 160.308 billion for 12-month. All bids submitted on Wednesday by banks and financial institutions have been accepted by the federal government. The cut-off yield of 3-month MTBs was set at 9.9564 percent compared to 9.9383 percent of previous auction while the accepted bids stood at Rs 246.113 billion.
For the 6-month, bids worth Rs 110.263 billion were accepted with a cut-off yield of 9.9791 percent up from 9.9675 percent. Similarly, the cut-off yield of 12-month was set at 9.9900 percent against 9.9932 percent while the accepted amount for 12-month stood at Rs 160.308 billion. The borrowed amount is less than the target of Rs 450 billion set for this auction. Maturity for this auction was Rs 483 billion with a negative additional requirement of Rs 33.048 billion.