Government raises Rs657bn through T-bill auction as yields show mixed trend

The government raised Rs657 billion through an auction of Market Treasury Bills (T-bills) on Wednesday, while yields moved in different directions amid expectations that the State Bank of Pakistan (SBP) will maintain its policy rate at 11.5% later this month.

 

The amount raised fell short of the government's Rs800 billion pre-auction target, despite strong investor participation. Bids submitted during the auction totalled Rs2.774 trillion.

 

The cut-off yield on one-month T-bills declined by 8 basis points to 11.3875%, while the three-month yield fell 5 basis points to 11.5992%.

 

In contrast, the six-month T-bill yield increased by 10 basis points to 11.89%, whereas the yield on the 12-month paper remained unchanged at 11.99%.

 

At face value, the government raised Rs680 billion through the auction.

 

Saad Hanif, head of research at Ismail Iqbal Securities, said the auction indicated that investor demand remained strong, but the government was unwilling to accept higher borrowing costs.

 

He noted that bidding was aggressive and yields were moving higher, prompting the government to accept less than its targeted amount.

 

The 12-month T-bill was a notable example, with fully meeting the target reportedly requiring a yield of around 12.44%, significantly above the previous cut-off and prevailing secondary-market levels. Instead, the government maintained the cut-off at 11.99% and left part of the target unraised.

 

According to Hanif, banks are seeking higher returns to commit funds for longer periods amid risks surrounding oil prices, inflation, external financing requirements and pressure on the rupee.

 

Short-term securities attracted comparatively stronger interest as market visibility remains better at the shorter end of the yield curve. The one-month paper consequently saw its cut-off yield decline by 8 basis points.

 

Analysts expect borrowing conditions to remain concentrated toward shorter maturities until greater clarity emerges over inflation and international oil prices.

 

Pakistan's consumer price inflation accelerated to 11.1% year-on-year in August, strengthening expectations that the SBP will keep its benchmark policy rate unchanged at 11.5% at its monetary policy meeting scheduled for September 14.