Treasury bills yields fall sharply

KARACHI: Treasury bills yields fell across the board at an auction on Wednesday as the market ratcheted up bets the central bank will be pressed to further cut interest rate to support economy from the spread of the coronavirus.

The cut-off yield for three-month T-bills fell 40 basis points to 10.90 percent. The six-month papers cut-off yield was down 100 bps at 10.30 percent, while the yield on 12-month paper fell 122 bps to 9.65 percent.

Analysts said investors’ anticipate more cut in policy rate. “Today’s auction is also a clear signs of recession, falling economic activities, falling asset prices and falling interest rates,” said Mohammed Sohail, a CEO at Topline Securities. “Investors think interest rates will further come down.”

The central bank on March 25 slashed interest rate by 150 basis points — its biggest rate cut in over seven years — in an out-of-cycle emergency meeting to cushion the already flagging economy from the coronavirus fallout.

A week earlier to the emergency rate cut, the central bank in its customary monetary policy meeting delivered a much-awaited interest rate cut of 75 basis points. The State Bank of Pakistan cut policy rate by a cumulative 225 basis point to 11 percent

Analysts increasingly see the central bank moving towards another rate cut on the back of recent weak set of economic data. In the auction, the government borrowed Rs156 billion through three-month paper, Rs142.8 billion from six-month T-bills and Rs160 billion from 12-month paper. The government raised a total of Rs459 billion through the auction of T-bills.

Pakistan is facing outflows of foreign funds from government securities since last month as monetary easing by the SBP and rattled global markets amid coronavirus outbreak dented demand for the country’s short-term debt. Foreigners were net sellers of $73 million of treasury bills on April 6 (Monday) the central bank data showed. However, they have been net buyers of $1.2 billion worth T-bills so far this fiscal year.