State Bank raises Rs589.7bln through MTBs

KARACHI: The State Bank of Pakistan (SBP) sold Rs589.7 billion worth of short-term government papers at an auction held on Wednesday with the yields increasing on all the securities across all the tenors.   

The cut-off yield on three-month market treasury bills (MTBs) rose to 5.9463 percent from 5.9017 percent at an auction on 18 January. 

The central bank sold Rs283.3 billion worth of three-month MTBs the fresh auction. A total of Rs236.2 billion was raised at 5.9896 percent for six-month MTBs compared with Rs5.9258 percent previously. The central bank also auctioned Rs71 billion worth of one-year paper at 5.9935 percent higher than 5.9598 percent earlier.  

Analysts said the amount raised through T-bills was slightly higher than the target of Rs550 billion fixed by the ministry of finance, reflecting a growing government’s need for cash to fund the budget deficit.   

“The rising yields on treasury bills and PIBs (Pakistan Investment Bonds) show signs of recovery in the bond market,” said an analyst.

“Earlier, the government was meeting its budgetary requirements through short-term securities at lower yields. However, now it seems to raise money at relatively higher yields to finance a budget deficit.”

Investor sentiments on interest rates and inflation have also been changed.  “Investors assume that the central bank would continue with its expansionary monetary policy stance in months to come on soft inflationary expectations,” said an analyst.     

The consumer price index inflation clocked in at 3.7 percent in January, unchanged from last month’s level.    The SBP said the actual inflation would be lower than the target of six percent during the current fiscal year. The central bank kept policy rate unchanged at 5.75 percent at its January policy review meeting.