KARACHI: Yields on Treasury bills (T-bills) fell on Wednesday as investors waited for clues about the future path of interest rates from next week’s central bank meeting.
The government raised Rs326 billion through the auction of T-bills, falling short of the Rs350 billion target, according to an auction result released by the State Bank of Pakistan. The auction saw participation of Rs1.4 trillion, compared with the maturity of Rs515 billion.
The yields declined by 20-41 basis points (bps), with the current yields standing at 11.58 per cent for the three-month T-bill, 11.4 per cent for the six-month paper, and 11.38 per cent for the 12-month paper.
Investors and analysts expect a 100-bps cut in rates at the SBP’s upcoming policy review scheduled for January 27 due to falling inflation. According to a note from JS Research, the ongoing trend of sharp disinflation is expected to continue. The consumer price index (CPI) for January is likely to decrease to 2.8 per cent, marking the lowest level since November 2015, primarily due to a high base effect. This is despite a month-on-month increase of 0.6 per cent. As a result, the average inflation rate for the first seven months of FY25 is projected to be 6.7 per cent, down from an average of 28.7 per cent for the same period last year.
“In our view, the persistent decline in inflation, settling at higher single digits from May 2025, strengthens the Monetary Policy Committee’s case for continuing the easing cycle. We expect another cut this month, albeit a relatively smaller reduction of 100bps, compared to the sharp cuts so far,” it said.
“Our recent market survey shows expectations for a policy rate cut, tilted towards 100bps reduction and expecting the easing cycle to continue beyond January 2025,” it added. Last month, the SBP cut the policy rate by 200bps to 13 per cent, marking the fifth consecutive rate cut since June. This brings the total reductions for 2024 to 900bps.