T-Bill yields hold steady, market awaits SBP’s cue

KARACHI: The treasury bill yields remained flat on Wednesday as investors sought signs of when the State Bank of Pakistan (SBP) might begin to cut interest rates.

The cut-off yield on a three-month T-bill remained unchanged at 21.6601 percent. The yield on a six-month paper inched down 1 basis points at 21.3874 percent. The yield on a 12-month paper remained unchanged at 20.8989 percent.

The government raised Rs538 billion through the auction of T-bills. The raised amount was slightly higher than the target of Rs525 billion.In the latest auction, the participation of Rs1.342 trillion was seen.

Analysts was already expecting that the market would participate at higher levels as compared to the previous auctions due to doubts on interest rate cut in upcoming monetary policy meeting due on April 29.

Most analysts see no change at April policy review meeting and the State Bank of Pakistan is likely to hold its benchmark interest rate steady at a record 22 percent.

The government managed to secure RS6.83 billion, falling short of the Rs190 billion target at an auction of Pakistan Investment Bonds held on Tuesday.Due to doubts on the interest rates cut, participation was at higher levels but the government didn’t prefer to pick long term funds at higher rates, said Chase Securities in a note.

“Therefore, the shortfall can also be raised from the T-bills auction held today as the government can raise higher than the target amount considering the market participation is at appropriate levels,” it said.

“However, it is likely that the market will participate at higher levels as compared to the previous auctions due to doubts on interest rate cuts in upcoming MPS [monetary policy statement].”

Analysts said the discussions regarding the fresh bailout from the International Monetary Fund and rising tensions in the Middle East may compel the central bank to delay monetary easing.The path to entering a new IMF programme may pose challenges, as such programmes typically entail austerity measures that could initially impede economic growth and stoke inflation.

“Nonetheless a gradual easing can’t be entirely discounted. We expect monetary easing to start as early by April possibly with a maximum delay until June,” said analyst at Ismail Iqbal Securities.