Karachi, November 13, 2024 – The State Bank of Pakistan (SBP) secured Rs 776 billion through its latest auction of Market Treasury Bills (MTBs) on Wednesday, marginally short of the Rs 800 billion target set for the auction.
This auction showcased robust interest from commercial banks, with a total bid volume reaching Rs 1.84 trillion, indicating a significant level of liquidity in the banking sector and interest in short-term government debt.
The SBP raised these funds in two segments: competitive bidding, which contributed Rs 700 billion, and non-competitive bidding, which added Rs 76 billion. Non-competitive bidding allows smaller investors to purchase treasury bills at the weighted average yield, often creating a more balanced investment structure in government securities.
In terms of yields, the auction produced mixed results across the different maturities. The cut-off yield for three-month treasury bills dropped by 20 basis points, landing at 13.70% from the previous 13.8998% noted in the October 30 auction. This decline reflects a slight easing in the short-term borrowing rate, potentially indicative of investor confidence in the near-term economic outlook or a desire by the central bank to manage borrowing costs. Meanwhile, the six-month treasury bill yield remained stable, showing no change in the cut-off yield. The yield for the 12-month treasury bills, however, increased by 10 basis points, moving up to 13.1999% from the prior rate of 13.0997%. The uptick suggests a heightened demand for returns over the longer term, potentially reflecting investor expectations of future inflationary pressures or economic uncertainty over the coming year.
The funds raised through treasury bill auctions serve a vital role in Pakistan’s fiscal policy by providing the government with necessary resources to bridge the budget deficit. These auctions are a regular activity managed by the SBP to ensure liquidity and government financing, with adjustments to yields reflecting broader economic conditions and investor sentiment.
This auction aligns with the SBP’s broader objectives of managing inflation and sustaining economic stability. However, the marginal decline in yields for shorter maturities and a rise in longer-term yields might signal a cautious approach by investors who remain watchful of potential changes in inflation trends or interest rate policies. The continued strong participation from banks indicates healthy demand for government securities, which remains a secure and liquid investment in the domestic financial market.
The outcomes of this auction provide insights into the economic sentiment and the SBP’s strategy, particularly as Pakistan faces the challenge of balancing growth with fiscal discipline amid changing global economic conditions.
