Government raises Rs835bn, exceeding T-bills auction target

KARACHI: The government on Wednesday raised Rs835 billion through the auction of treasury bills, surpassing the original target of Rs700 billion, while yields remained nearly unchanged.

The cut-off yields on a three-month paper slightly decreased by one basis point to 17.48 per cent, while the six-month and 12-month yields stayed the same at 17.74 per cent and 16.9989 per cent, respectively. There was significant interest in the 12-month tenor, with bids totalling Rs468.4 billion.

The yield for the shorter tenor T-bill inched down, while the yields for the six- and 12-month papers remained unchanged. However, analysts said that traders are preparing for a potential interest rate cut at the central bank’s upcoming monetary policy meeting next week.

“We believe the market’s anticipation of a potential rate cut in the upcoming monetary policy has led to heavy bids, especially in the longer tenor, with the SBP receiving a total of Rs1,618 billion in bids, reflecting strong interest from participants,” said Arif Habib Limited in a note.

Analysts anticipate a reduction of 100-150 basis points in interest rates at the SBP’s upcoming monetary policy meeting on September 12. This is attributed to a sustained decline in inflation.

In August, the consumer price index inflation stood at 9.6 per cent, marking the first single-digit reading in almost three years. According to Alfalah Securities, the decrease in price pressures creates an opportunity for additional interest rate cuts.

With anticipated positive real rates of 6-8 per cent, the SBP is expected to consider gradual cuts in the next three monetary policies for the year, which are scheduled on September 12, November 4, and December 16, 2024.

The SBP has already cut policy rates by 250bps in its previous two meetings. Currently, the policy rate is 19.5 per cent.Besides cooling inflation, a manageable current account deficit, and emphasis on economic growth are also anticipated to prompt the central bank to continue with the monetary easing cycle.