SBP sells Rs387.4bln worth T-bills; yields remain flat

KARACHI: Treasury bills yields remained flat at an auction held on Wednesday, while dealers said the latest auction of came mostly in line with the market expectations.

The central bank sold Rs387.4 billion worth of short-term government papers. The cut-off yield on a three-month market treasury bill stood at 5.9463 percent, unchanged from the previous auction, held on February 15.

The yield on Pakistan’s six-month benchmark treasury bills remained flat at 5.9896 percent.

The central bank sold Rs197 billion of six-month paper. Moreover, the central bank sold Rs2.830 billion of a one-year paper and the cut-off yield held steady at 5.9935 percent, identical to the preceding auction.

“The raised amount in treasury bills was higher than the target of Rs350 billion set by the ministry of finance for the said auction, signaling that the government remained in a need for bank borrowing to finance the budget deficit.”

The budget problems are getting worse as tax collection continued to fall. Furthermore, the government is also facing slowdown in foreign inflows, the dealer added.

The auction target calendar for the sale of market treasury bills and Pakistan Investment Bonds (PIBs) issued by the  State Bank of Pakistan  for the period March to May 2017, also spelled out an increasing requirement for the domestic funding to meet budget-related spending.

The government has planned to raise a total of Rs2.1 trillion through the sale of T-bills and Pakistan Investment Bondss during March-May period.

Though, inflation numbers for the month of February are still awaited, the broad anticipation was for increased consumer price index inflation (CPI) on upward revision in fuel prices. Analysts are expecting CPI to clock in at 4.12 percent in February.

“The interest rates have bottomed out and we see some hike in the policy rate later this year on the possibility of imported inflation driven by high international oil prices, pressure on balance of payments, owing to lower foreign aid and decreasing exports and remittances,” an analyst said.