T-bill auction surpasses target with Rs716bn raised

KARACHI: The government raised Rs716 billion through the auction of Market Treasury Bills on Wednesday, with the yield falling on a six-month paper.

The raised amount was higher than the pre-auction target of Rs400 billion. The maturity amount was Rs1.038 billion.Liquidity placement was the highest in a 12-month T-bill, with Rs268.6 billion, followed by Rs232.6 billion in the three-month paper and Rs215 billion in the six-month tenor.

The cut-off yield on a three-month paper stood at 15.2994 percent. The bids were rejected by the government for the shorter tenor T-bill at the previous auction held on October 2.The yields on a six-month-paper fell by five basis points (bps) to 14.343 per cent, while the 12-month rate remained unchanged at 13.735 per cent.

“The yield curve continues to flatten, reflecting the market’s strong demand for longer tenors,” said Arif Habib Limited in a brief note.Analysts said the local money market is flush with liquidity after a bumper dividend by the State Bank of Pakistan to the government.

The government has started a T-bill buyback programme in an effort to reprofile its debt and reduce the burden of debt servicing costs. The SBP held two buyback auctions for T-bills, amounting to Rs826 billion, to retire T-bills maturing in December.

The fact that inflation is predicted to stay in the single digits in the coming months will strengthen the case for further rate cuts 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.