Karachi: The State Bank of Pakistan (SBP) successfully raised Rs581.7 billion through the auction of Market Treasury Bills (T-bills) on Wednesday, surpassing its target of Rs550 billion as strong participation from investors drove total bids to Rs915 billion.
The central bank accepted both competitive and non-competitive bids to meet the government’s short-term financing requirements, reflecting healthy liquidity in the domestic financial market.
Short-term yields move higher
In the latest auction, yields increased between 21 and 39 basis points compared to the previous auction, broadly aligning with movements in the secondary market. The rise in yields indicates cautious investor sentiment and evolving expectations regarding interest rates.
For the one-month tenor, the SBP accepted Rs95 billion against a target of Rs50 billion. The cut-off yield was set at 10.50 percent, while the weighted average yield stood at 10.32 percent.
In the three-month T-bills, the central bank accepted Rs260 billion compared with the target of Rs200 billion. The cut-off yield was 10.50 percent, with a weighted average yield of 10.42 percent.
Lower demand for longer tenors
Demand was comparatively weaker for longer maturities. In the six-month tenor, the SBP raised Rs71 billion against a target of Rs100 billion at a cut-off yield of 10.74 percent, with a weighted average return of 10.72 percent.
For the 12-month T-bills, the central bank accepted Rs155 billion, falling short of the Rs200 billion target. The cut-off yield was 10.99 percent, while the weighted average yield stood at 10.91 percent.
Analysts cite inflation and oil price risks
Market analysts said the rise in cut-off yields reflects changing expectations about the interest rate outlook.
According to Maaz Azam, Head of Research at Optimus Capital Management, the increase in yields was “significant” and likely linked to rising oil prices, emerging inflationary pressures, and fading expectations of a near-term policy rate cut.
He added that if inflation continues to accelerate, the possibility of a policy rate hike cannot be ruled out.
Government financing needs supported
The funds raised through the treasury bills auction will help the government manage its short-term liquidity requirements and roll over maturing domestic debt.
PIB auction sees no bids accepted
Separately, the SBP rejected all bids in the Pakistan Investment Bonds (PIB) Floating Rate (Semi-Annual) auction for the 10-year tenor, despite a target of Rs25 billion.
As no bids were accepted, the cut-off spread remained 0 percent over the benchmark, compared with 0.55 percent in the previous auction. The outcome suggests limited investor appetite or a pricing mismatch for the floating-rate instrument at the offered levels.
Rupee edges higher while gold prices fall
In the currency market, the Pakistani Rupee recorded a marginal gain against the US Dollar in the interbank market. The rupee closed at 279.42 per dollar, improving by Rs0.03 from the previous day’s close of 279.45.
Meanwhile, according to the All-Pakistan Sarafa Gems and Jewellers Association, the price of 24-karat gold per tola in Pakistan dropped sharply by Rs10,000, settling at Rs539,962.
In the international market, gold prices fell by $100, declining to $5,172 from $5,272, while silver prices rose by $1 to $85.20, the association added.