Govt raises Rs250bn via T-bills sale, yields drop up to 50bps

KARACHI: The government raised Rs434 billion through the auction of Market Treasury Bills on Wednesday, exceeding the target of Rs250 billion, according to an auction result released by the State Bank of Pakistan.

However, the amount raised was less than the Rs654 billion maturity amount.The cut-off yields on the three-month T-bill decreased by 22 basis points (bps) to 11.78 per cent. For the six-month paper, the yield fell by 21bps to 11.79 per cent, while the yield on the 12-month paper dropped by 50bps to 11.8 per cent.

Analysts indicated that the latest auction results suggest traders anticipate a further rate cut by the SBP at its upcoming monetary policy meeting later this month, due to declining inflation. Pakistan’s consumer inflation rate slowed to 4.1 per cent year-on-year in December, down from 4.9 per cent the previous month, driven by a stable currency, lower global commodity prices and improved supply chain conditions.

Most analysts expect interest rates to decrease into single digits this year, with the majority of the easing likely to occur early in the year. The SBP had already cut its key policy rate by 200bps to 13 per cent in December, marking the fifth consecutive reduction since June. This brought the total rate cuts for 2024 to 900bps.

In a statement to the Senate Committee, the SBP’s governor, Jameel Ahmad, said that inflation is projected to rise in the coming months due to base effect and higher energy prices. However, he emphasised that inflation is expected to remain within the SBP’s target range of 5-7 per cent. The governor also noted a significant reduction in interest rates, which have dropped from 22 per cent to 13 per cent, with further decreases to single-digit levels anticipated soon.

In addition, the government raised Rs138 billion through the auction of the Government of Pakistan Ijarah Sukuk, falling short of the Rs250 billion target. The yield on a one-year Islamic bond decreased to 10.42 per cent, down from 10.99 per cent in the previous auction held on December 3. Last January, this yield was 19.5 per cent.