Margins on short-term government paper declined up to 15 basis points (bps) in the auction held Wednesday. The State Bank of Pakistan conducted MTBs auction on October 28, 2015 for the sale of 3-month, 6-month and 12-month papers and received bids amounting to Rs 612.906 billion with realised value of Rs 589.077 billion.
Most of the bids were received for 12-month period as banks and other financial institutions are expecting further decline in key policy rate on lower inflation outlook. The received bids included Rs 183.318 billion for 3-month, Rs 144.782 billion for 6-month and Rs 261 billion for 12-month. The federal government accepted bids amounting to Rs 214.250 billion (Rs 207.441 billion realised amount). The borrowed amount is less than the target of Rs 250 billion set for this auction. However, the cut-off yield on all MTBs declined slightly compared to previous auction.
The cut-off yield of 3-month MTBs, set at 6.3038 percent, fell by 13 basis points (bps) with accepted bids amounting to Rs 97.58 billion (realised amount). For the 6-month, bids worth Rs 48.233 billion were accepted at a cut-off yield of 6.3305 percent down from 6.4800 percent, depicting a decline of 15 bps. Similarly, with a decline of some 15 bps, the cut-off yield of 12-month T-bills was fixed at 6.3325 percent and some Rs 61.623 billion were borrowed.