SBP sells Rs1.137bln worth of T-bills

KARACHI: The central bank sold Rs1.137 billion worth of three-month market treasury bills in an auction on Wednesday with yield on the paper going up, while no bids were received for other tenors.

An analyst said the increase in three-month t-bills was anticipated after the central bank raised its benchmark policy rate by 25 basis points to 6 percent on January 26.

The yield on a three-month treasury bills edged up to 6.2144 percent from 5.9910 percent at the previous auction held on January 17, the State Bank of Pakistan (SBP) said.

Banks did not offer bids for the six- and 12-month treasury bills at the auction. The raised amount was much lower than the pre-auction target of Rs900 billion.

Analysts said the t-bills sale was undersubscribed in line with the market expectations.

The tightening of monetary policy by the SBP contributed to banks’ unwillingness towards investment in short-term treasury papers at the recent auction.

An analyst said there is an understanding in the market that the SBP would continue its tight interest rates cycle in an effort to check rising inflation stemmed from currency depreciation and surge in international oil prices.

The SBP sees inflation to crawl up to 6 percent by June this year due to lagged impact of rupee devaluation and increase in oil prices.

Analysts expect that banks could increase their participation in long-term government securities in times to come. “We expect another 75 basis points rise in interest rate for the rest of 2018 due to inflationary pressure from currency devaluation and rise in oil prices,” an analyst said.