Treasury bills yields move up

SBP sells Rs363bln worth of papers

KARACHI:  Treasury bills yields rose at an auction on Wednesday, in line with market expectations, which analysts said was an indication of an interest-rate rise in coming months.

The State Bank of Pakistan (SBP) sold Rs363 billion worth of market treasury bills (MTB) in the auction, exceeding its pre-auction target of Rs350 billion. The banks offered Rs691 billion for the auction.  

The yield on Pakistan’s six-month benchmark treasury rose to 5.9046 percent against 5.8408 percent in previous auction held on July 20.  The State Bank of Pakistan (SBP) sold Rs176 billion worth of six-month paper.  

In a latest auction, yield on 12-month paper rose to 5.9148 percent, compared with 5.8586 percent. The central bank sold Rs104 billion long-term paper.  The cut-off yield for the shortest, three-month treasury bills increased to 5.8571 percent from 5.8124 percent last. The SBP sold Rs83 billion worth of three-month T-bills. 

It was the first auction held after the announcement of the monetary policy by the central bank last week. The SBP kept policy rate unchanged at 5.75 percent for the July-August period.

Analyst said the interest rates have bottomed out and there are chances that the central bank would raise policy rate in next monetary policy review meeting to be held in September.   

They added that the market was expecting rise in yields as there was room in interest rate hike after the inflation number for the month of July rose more than expected.

Consumer Price Index (CPI) inflation for the month of July 2016 surged to 4.1 percent year-on-year, which is a 19-month high and higher than market expectations. Previous month in June 2016, CPI inflation was 3.2 percent.

Analysts said the auction result also showed that the government is still higher borrower in the market.

The appetite for the investment in the government securities remains on higher side by the commercial banks.