Govt raises Rs852bn via MTBs’ sale

KARACHI: The government on Wednesday raised Rs852 billion through an auction of Market Treasury Bills (MTBs) against a target of Rs650 billion, with yields on a short-duration paper rising.

The cut-off yield on the three-month T-bill increased by 94 basis points to 17.9374 percent. The bids for the 6 and 12 months papers were rejected.

Analysts said a bid pattern in the fresh auction revealed expectations for increased interest rates at the next monetary policy reviews.

The State Bank of Pakistan (SBP) raised the policy rate by 100 basis points (bps) to 17 percent on Monday, aiming to contain persistent inflationary pressures.

According to the SBP, the consumer price inflation (CPI) inflation remained strong in November and December, and the rise in core inflation is much steeper than seen during past cycles.

Hence, “it is critical to anchor inflation expectations and control price increases, before pressures become entrenched,” the SBP added.

Forex reserve drawdown (down $3.7 billion to 4 billion since the last monetary policy announcement), a stalemate with the International Monetary Fund, and strong inflation outturns (averaging above SBP’s forecast range) formed the main premise for our call of 200bps increase in the policy rate, said Alfalah Securities in a note.

“We maintain our expectation, where we see policy rate being increased to 18 percent. We see January inflation clocking in at 24.8 percent,” it stated.