Govt raises Rs259bn through T-bill auction as yields marginally increase

KARACHI: The government raised Rs259 billion from the auction of Market Treasury Bills on Wednesday, falling short of the Rs350 billion target, with yields increasing across all tenors.

Additionally, the amount raised was below the Rs371 billion maturity amount.The yield on a three-month Treasury bill rose by 3 basis points (bps) to 11.83 per cent. The yield on a six-month paper increased by 17bps to 11.67 per cent, while the yield on a 12-month bill also went up by 6bps to 11.65 per cent.

Analysts report that concerns over the current account deficit and a declining rupee are contributing to the rise in Treasury bill (T-bill) yields. Traders are worried that Pakistan’s central bank may be reluctant to lower interest rates or implement a modest rate cut at the upcoming monetary policy meeting scheduled for March 10. In January, the country’s current account recorded a deficit of $420 million, a shift from a surplus of $474 million the previous month.

Last month, the State Bank of Pakistan reduced its key interest rate by 100 ps to 12 per cent due to declining inflation. In January, Pakistan’s consumer inflation rate dropped to 2.4 per cent year-over-year, the lowest level in over nine years, down from 4.1 per cent in the previous month. Analysts expect inflation to continue slowing, potentially falling below 2.0 per cent in February.

In its last monetary policy statement, the SBP indicated that near-term inflation will remain volatile, with expectations of an increase close to the upper bound of the target range towards the end of fiscal year 2025. The SBP projects that headline inflation for FY25 will average between 5.5 and 7.5 per cent.