T-bill yields remain unchanged

KARACHI: The government raised Rs1.0 trillion through an auction of the Market Treasury Bill, while the yields on all papers stayed flat.

The raised amount was higher than the pre-auction target of Rs650 billion. The cut-off yield on the three-year T-bill stood at 15.75 percent, unchanged from the previous auction held on July 13. The yield on the six-month paper also ended flat at 15.80 percent. Yields on 12-month paper clocked in at 15.94 percent, unchanged from the previous auction.

The State Bank of Pakistan (SBP) sees inflation in the range of 18-20 percent this fiscal year before declining sharply during FY2024. The baseline outlook is subject to significant uncertainty, with risks arising from the path of global commodity prices, the domestic fiscal policy stance, and the exchange rate.

Domestically, as energy subsidies were reversed, both headline and core inflation increased significantly in June, rising to a 14-year high, the SBP said in a monetary policy statement issued last week.

Inflation expectations of consumers and businesses also rose markedly. At the same time, the current account deficit unexpectedly spiked in May and the trade deficit continued its post-March widening trend to reach a 7-month high in June, on burgeoning energy imports, it said.

The government borrows aggressively through T-bill auctions so it can sell the bonds and bills at higher yields. The reason is that its funding needs are growing. And its financing avenues are limited on lack of foreign assistance amid delay in the revival of the IMF loan programme.