The cut-off yield of all short-term government papers fell up to 133 basis points in the auction held Wednesday amid rate cut expectations in next monetary policy.

The State Bank of Pakistan (SBP) conducted the auction on March 11, 2020 for the sale of 3-month, 6-month and 12-month Market Treasury Bills (MTBs) and received bids amounting to Rs 1.6 trillion with a realized value of Rs 1.5 billion. The received bids included Rs 456.742 billion for 3-month, Rs 355.725 billion for 6-month and Rs 820.268 billion for 12-month tenors.

Financial institutions aggressively participated in the auction to park their liquidity at higher rates due to likely cut in interest rate next week.

The margin on all government securities declined in the range of 66bps to 133bps in the auction as the market is expecting reduction in the key policy rate in the next meeting of independent Monetary Policy Committee, which is scheduled to meet on March 17, for deliberations on interest rate. The committee has adopted a tight monetary policy stance for last two years and currently the policy rate stands at 13.25 percent since July 2019.

The federal government borrowed some Rs 323.386 billion (Rs 303.874 billion realized value). The borrowed amount is slightly higher than the actual target of Rs 300 billion set for this auction.

The cut-off yield of 3-month T-bills declined by 66 bps to 12.7288 percent. some Rs 128.585 billion were raised. For the 6-month, bids amounting to Rs 102.301 billion were accepted at a cut-off yield of 12.5050 percent, down 84 bps.

Similarly, the cut-off yield of 12-month T-bills fell by 133 bps to 12 percent down from 13.33 percent against the borrowed amount of Rs 92.50 billion.