SBP sells MTBs worth Rs142.53bln; yields down

KARACHI: The State Bank of Pakistan (SBP) on Wednesday sold Rs142.539 billion worth of market treasury bills (MTBs) with yields sharply down on short-term maturities, a week after the central bank reduced the policy rate by 50 basis points to a record low of six percent.
The amount raised through T-bills was much lower than the target of Rs250 billion set by the Ministry of Finance for the said auction.
Analysts said the decline in the policy rate usually pushes down the yields on all government securities, including treasury bills and Pakistan Investment Bonds.
"This is quiet normal, as the secondary market is also adjusting the yields with the policy and discount rates," an analyst said.
The yield on Pakistan’s six-month benchmark treasury was down 6.4800 percent from 6.9513 percent during the last auction held on September 2. It sold Rs81.575 billion worth of six-month paper.
The cut-off yield for the shortest, three-month treasury bills, fell to 6.4828 percent as compared to 6.9308 percent in the previous auction. It sold Rs60.964 billion three-month T-bills.
However, the Ministry of Finance rejected the bids for the longest, 12-month government paper.
Analysts said the T-bills yields gauge investors’ sentiment towards inflation and upcoming monetary policy stance of the central bank.
Analysts foresee the consumer price index (CPI) inflation to stay below two percent in September, amid lower commodities prices and smooth supply of perishable food items.
However, Eid-ul-Azha is likely to pull up food inflation in September.
They believe that the policymakers of the monetary policy are likely to keep the policy rate unchanged in the upcoming bimonthly review meeting scheduled in November.