Margin on MTB down 27 basis points

26 May, 2016

Following a reduction in the key policy rate, margin on short-term government papers declined up to 27 basis points in the auction held Wednesday. The State Bank of Pakistan (SBP) in the last monetary policy announced Saturday cut the policy rate by 25 bps to 5.75 percent for the next two months. After the announcement of the monetary policy, first auction for Market Treasury Bills (MTBs) was held Wednesday and the cut-off yield of all short-term bonds declined slightly.
Banks aggressively participated in the tender, invited by the State Bank through Primary Dealers, for the sale of 3-month, 6-month and 12-month government of Pakistan Market Treasury Bills.
Overall, bids amounting to Rs 575.762 billion with a realised value of Rs 554.722 billion were received for all T-bills. Most of the bids were received for 12-month period. The received bids included Rs 123.612 billion for 3-month, Rs 232 billion for 6-month and Rs 220.25 billion for 12-month. The federal government accepted bids amounting to Rs 276.635 billion (Rs 267.371 billion realized value). The borrowed amount is much higher than the target of Rs 100 billion set for this auction. However, the cut-off yield of all MTBs fell slightly in the wake of recent cut in the interest rate.
The cut-off yield of 3-month MTBs was set at 5.9910 percent, down by 27 basis points (bps) with accepted bids amounting to Rs 58.331 billion (realized amount). For the 6-month, bids worth Rs 135.69 billion were accepted at a cut-off yield of 6.0109 percent down from 6.2665 percent.

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