At 14.4pc, benchmark T-bill at lowest level since April 2022

KARACHI: The government raised Rs244 billion through the auction of Market Treasury Bills on Wednesday, slightly less than the target of Rs250 billion.

With bids of Rs152.6 billion for three-month T-bills, Rs223.2 billion for six-month, and Rs484.5 billion for 12-month tenor, there was a strong participation of Rs860 billion in the latest auction, according to the auction result.

The six-month cut-off yield was set at 14.398 percent, marking the lowest level since April 2022, and seven basis points (bps) lower than the secondary market yield of 14.47 per cent.The yield on a 12-month paper came in at 13.735 per cent, the lowest since April 2022 as well and 39bps higher than the one-year secondary market rate of 13.34 per cent.

“All bids for the 3-month tenor were rejected, reflecting the government’s strategy of shifting the debt profile towards longer tenors,” said Arif Habib Limited in a note.Local money market is flush with liquidity after a bumper dividend by the SBP to the government, said Topline Securities.

The government has started a T-bill buyback programme in an effort to reprofile its debt and reduce the burden of debt servicing costs. In an auction on Monday, the government repurchased T-bills for the first time, amounting to Rs351 billion against the Rs500 billion target.

Following better-than-expected Pakistan’s inflation data, which showed the consumer price index dropped to 6.9 per cent in September -- the lowest level since January 2021 -- and compared to 9.6 per cent in the previous month, the government released its most recent borrowing schedule. Numerous important elements, such as a high base effect, falling global commodity and energy prices, and a stable local currency, support this disinflationary tendency.

The fact that inflation is predicted to stay in single digits in the coming months will strengthen the case for further rate cut by the SBP for the fourth consecutive month at its monetary policy meeting, which is scheduled for November.Analysts expect the SBP to reduce rates by a further 200bps in both the November and December meetings. The SBP has already cut rates by 450bps since June.