Government borrows Rs 131 billion througgh auction for MTBs

09 Jun, 2016

The federal government on Wednesday borrowed an amount of Rs 131 billion from banking sector through auction of short term bonds to meet its financial needs. Cut-off yield on short term government papers also declined slightly in the auction held on Wednesday. The State Bank of Pakistan (SBP) conducted auction of Market Treasury Bills (MTBs) on June 8, 2016 for the sale of 3-month, 6-month and 12-month bills and accordingly received bids amounting to Rs 394.646 billion with realised value of Rs 382.229 billion.
Although banks aggressively participated in the auction, however most of bids were received for 6-month period as banks and other financial institutions are expecting changes in policy rate in coming months and reluctant to invest in long term papers. Received bids includes Rs 85.569 billion for 3-month, Rs 226.05 billion for 6-month and Rs 83 billion for 12-month.
The federal government accepted bids amounting to Rs 137.150 billion (Rs 131.574 billion realized value). The borrowed amount is massively higher than the target of Rs 50 billion set for this auction. However, cut-off yield of all MTBs have slightly declined. Cut-off yield of 3-month MTBs set at 5.9463 percent, down by 4 basis points (bps) with accepted bids of Rs 11.7398 billion (realized amount). For the 6-month, bids worth Rs 58.269 billion were accepted at a cut-off yield of 5.9684 percent down from 6.0109 percent, depicting a slight decline of 4 bps. Similarly, cut-off yield of 12-month T-bills fixed at 6.0048 percent, fell by 2 bps and some Rs 61.565 billion were borrowed. The last auction MTBs for this fiscal year will be held on June 22, 2016 with a tentative borrowing target of Rs 50 billion, which include Rs 28.328 billion maturing amount and an additional amount of Rs 21.672 billion.

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