SBP to sell government debt worth Rs4.25trln in three months

KARACHI: The State Bank of Pakistan is set to raise Rs4.25 trillion through Market. Treasury Bills (MTBs) and Pakistan Investment Bonds (PIBs) in October-December 2019 to finance a gaping budget deficit, the central bank’s auction calendar showed on Tuesday.

The central bank would sell Rs3.80 trillion of three-, six- and 12-months debts through tre sury bills. The SBP also plans to offer Rs300 billion worth of three-, five-, 10-, and 20-year fixed rate PIBs.

Moreover, the SBP would auction Rs150 billion of 10-year floating rate PIBs. The government needs liquidity to meet a large chunk of its spending requirements through commercial banks’ financing.

The government has stopped borrowing from the central bank as per the International Monetary Fund (IMF) condition to create a fiscal discipline.

Yields on MTBs and PIBs declined across the board in the previous auctions. Analysts expect yields on both the benchmark bonds to fall further on expectations of drop in inflation over the medium- to long-term.

The consumer price index inflation rose to 11.4 percent in September from 10.5 percent in August. Most analysts believe the central bank’s Monetary Policy Committee is likely to hold the policy rate in its next review meeting; however, some even see it going down next year.

The SBP is scheduled to announce its monetary policy in November. BMA Capital, in its report said, “We view a rate cut of 50 basis points is likely and shall set the tone for further rate cuts in future”.

“We see low likelihood of any significant cuts in the SBP Policy Rate that may still remain elevated because of ongoing IMF programme and the need to maintain and build foreign exchange reserves,” the brokerage added.