Govt raises Rs464bn via MTBs’ sale

KARACHI: The government on Wednesday raised Rs464 billion through an auction of the Market Treasury Bills (MTBs) against a target of Rs800 billion, with yields on a short-duration paper rising slightly.

The cut-off yield on the three-month T-bill increased by 6 basis points to 17.9996 percent. The yield on six-month paper stood at 17.8400 percent. The yield on 12-month paper was 17.9499 percent.

A bid pattern in the most recent auction, according to analysts, indicated expectations for higher interest rates at the upcoming monetary policy reviews.

“Considering SBP's recent strategy to keep rates higher than core inflation, rates are likely to increase further as the inflation expectations have increased after sharp currency depreciation,” said Fahad Rauf, head of research at Ismail Iqbal Securities. The State Bank of Pakistan (SBP) raised the policy rate by 100 bps to 17 percent last month in order to contain persistent inflationary pressures.

Inflation is expected to remain high on fiscal tightening and the impact of the rupee's depreciation, rising exceeding 30 percent during the coming months and averaging 27 percent in FY2023. In light of that, analysts said that the central bank would maintain a tight monetary policy, hike rates by further 100–200 basis points before June 2023, and then gradually loosen up starting in the fourth quarter of that year as inflationary pressures abate.