Karachi, September 5, 2024 – The State Bank of Pakistan (SBP) successfully raised Rs 835 billion through the auction of Market Treasury Bills (MTBs) on Wednesday, surpassing its initial target of Rs 700 billion. The auction saw aggressive participation from banks, which collectively bid a substantial Rs 1.62 trillion for the purchase of government securities.
According to the SBP, the highest level of interest was in the 12-month treasury bills, where bids amounted to Rs 876 billion. However, the central bank accepted bids worth Rs 468 billion for these long-term maturities, against a target of Rs 350 billion. The cut-off yield for the 12-month treasury bills was set at 16.9989%.
Market analysts attribute this strong interest in long-term securities to expectations of a potential rate cut by the SBP in its upcoming monetary policy review. The current policy rate stands at 19.5%, and there is widespread anticipation that the central bank may lower rates to support economic growth.
In addition to the 12-month bills, the SBP accepted bids worth Rs 101 billion for 3-month treasury bills, despite receiving offers totaling Rs 351 billion against a target of Rs 175 billion. The 3-month bills were accepted at a cut-off yield of 17.4799%.
The auction also included the sale of 6-month treasury bills, where the SBP raised Rs 266 billion against bids of Rs 392 billion and a target of Rs 175 billion. The cut-off yield for these bills was set at 17.7449%.
The aggressive bidding and higher-than-targeted acceptance rates in this auction highlight the banking sector’s confidence in the government’s debt instruments, even as the market anticipates changes in the monetary policy stance. The significant participation in long-term securities suggests that banks are positioning themselves to benefit from any future rate cuts, which would enhance the value of these instruments.
The funds raised through this auction will be used by the government to finance the budget deficit, a critical aspect of managing the country’s fiscal operations. The SBP regularly conducts these auctions to generate necessary funds, providing banks with an opportunity to invest in secure government-backed instruments.
This latest auction underscores the ongoing demand for government securities, reflecting both the liquidity available in the banking system and the strategic positioning of financial institutions ahead of potential shifts in monetary policy. As the SBP continues to navigate the complex economic landscape, such auctions will remain a key tool in managing public finances.
