Yields fall at weekly auction for MTBs

KARACHI: The State Bank of Pakistan (SBP) sold Market Treasury Bills (MTBs) worth Rs207.44 billion with yields further reduced in Wednesday’s auction.
Analysts said that the recent auction shows markets’ expectation of another cut in the policy rate by the central bank in its monetary policy meeting scheduled next month.
The data on the consumer price index (CPI) inflation revealed consumer prices fell to 12-year low may have supported some views that the central bank would slash the policy rate further by at least 50 basis points. The SBP cut the policy rate to six percent in its monetary policy meeting held last month. The CPI inflation declined to 1.32 percent in September, down from 1.75 percent in August this year.
Some analysts said the markets are assuming a downward revision and a status quo in the policy rate both because of surplus liquidity in the money market.
“Given the pace of private sector credit remained sluggish, the banks have no choice, but to park their cash into the government securities,” an analyst said.
“The yields seem continue to go down even the interest rates are flat in the coming monetary policy decisions,” he added.
The SBP sold Rs48.233 billion in six-month treasury bills at the cutoff yield of 6.3305 percent, down from 6.4800 percent in the previous auction held on October 14.
An amount of Rs97.584 billion in three-month government paper was sold at the cutoff yield of 6.3038 percent as compared to 6.4380 percent during the preceding week.
The cutoff yield on 12-month tenor T-bills fell to 6.3325 percent against 6.4800 percent. The State Bank sold the 12-month bills worth Rs61.623 billion.