KARACHI: Treasury bill (T-bill) yields remained largely steady on Wednesday, indicating that investors expect no interest rate changes from the central bank this month due to concerns about possible inflationary pressures following flash floods in Pakistan.
The government raised Rs491 billion from the auction of T-bills, exceeding its target of Rs400 billion. The generated amount was lower than the maturity of Rs824 billion, according to the auction result issued by the State Bank of Pakistan (SBP).
Overall, total bids received amounted to approximately Rs1.4 trillion.The yield on the one-month T-bill fell by 15 basis points (bps) to 10.75 per cent, while the yields on the other tenures remained unchanged. Specifically, the yield on the three-month T-bill stayed at 10.85 per cent, the six-month yield remained at 10.85 per cent, and the yield on the 12-month T-bill held steady at 11 per cent.
The government raised Rs36.7 billion from the auction of a floating-rate Pakistan Investment Bond on the same day.“The latest T-bill auction reflects a stable yield curve, signaling that the market is pricing in a status quo stance by the State Bank in the upcoming policy review,” said Saad Hanif, head of research at Ismail Iqbal Securities Limited.
The SBP held the key interest rate steady at 11 per cent in July. It has reduced its benchmark interest rate from 22 per cent to 11 per cent since June 2024.“Robust participation highlights ample system liquidity, while higher-than-target acceptance reflects elevated government funding requirements,” Hanif said.“The flatness in yields suggests limited room for near-term monetary easing, with authorities likely to maintain a cautious stance,” he added.
Pakistan’’s inflation unexpectedly eased to 3.0 per cent in August from 4.0 per cent in the previous month. Market participants and analysts are closely watching the upcoming interest rate decision by the SBP during its policy meeting on September 15. This monitoring comes in light of the devastating floods that have destroyed thousands of acres of crops in Punjab, the country’s largest agricultural producer. According to the finance ministry, the damage caused by the floods may exacerbate fiscal pressures and disrupt food supplies in affected areas. Additionally, the upcoming IMF review poses a challenge, as meeting tax collection and expenditure targets may be difficult due to the recent challenges related to this natural calamity, according to analysts.
The government repaid over Rs1.6 trillion of debt to the SBP. The finance ministry reported last week that Rs1.133 trillion was repaid on August 29, and Rs500 billion was cleared in June, bringing total early repayments to over Rs2.6 trillion in less than one year.