T-bills’ yields fall sharply

KARACHI: Market Treasury Bills’ (MTBs) yields slipped in Wednesday’s auction owing to lower investor participation, amid anticipation of a further slash in interest rates, drastically needed to help revive economic activities locked down by coronavirus pandemic.

State Bank of Pakistan’s data showed, the government raised Rs435.5 billion through the auction of treasury bills. The fetched amount was lower than the pre-auction target of Rs500 billion.

The cut-off yield for three-month treasury bills fell to 8.48 percent from 10.90 percent. The borrowed amount via shortest tenor paper stood at Rs164 billion. The six-month papers cut-off yield was down at 8 percent, compared with 10.30 percent in previous auction. The government raised Rs126 billion through the sale of six-month treasury bills.

The yield on 12-month paper slipped to 7.56 percent from 9.65 percent, while the raised amount settled at Rs145 billion. Analysts said the shock from the COVID-19 and the decline in inflation outlook were raising expectations for a possible policy rate cut in the upcoming policy review due next month.

The central bank, however, cut interest rates by another 2 percentage points to 9 percent, bringing it to a single digit in an emergency move last week. The policy rate has reduced by a cumulative 425 basis points in one month.

A rate cut of 1-2 percent within the next quarter is on the cards, analysts added. National Consumer Price Index (CPI) inflation fell to 10.2 percent in March from reached 12.4 percent in previous month.