3M TBill cut-off yields jump 228bps

December 1, 2021: Yields on three-month treasury bills (T-Bills) in auction held on Wednesday jumped by 228 basis points as the government only accepted bids worth Rs504.3 billion in all three tenors against a target of Rs750bn, data released by the State Bank of Pakistan (SBP) showed.

Participants bid Rs749.3bn in the auction, of which Rs423.4bn were in 3M, Rs201bn in 6M and Rs125bn in 12M papers. In response, the government accepted bids worth Rs338.4bn in 3M at 10.78%, Rs111bn in 6M at 11.50%and Rs55bn at 11.51% in 12M papers.

Cut-off yields for 3M rose from 8.5% in the last auction to 10.78% on Wednesday, indicating market’s expectation for another rate hike in the upcoming monetary policy announcement.

Meanwhile, secondary market yields for 3M, 6M and 12M papers as of December 1, 2021 stood at 9.74%, 10.17% and 10.72% respectively.

Some observers believe the moves mark the start of de-linking between policy rates and market rates by the SBP under the International Monetary Fund’s recommendations to discourage government borrowing. The IMF is seeking further autonomy for the central bank curbing its quasi-fiscal role in the economy.

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