SBP raises Rs672bn via T-bills auction, yields rise by up to 129bps

April 27, 2022 (MLN): The cut-off yields of T-bills have reached 22 year high, increasing by up to 129 basis points in the auction conducted by the State Bank of Pakistan (SBP) on Wednesday.

The government raised Rs672 billion through the auction of three, six, and twelve-month T-bills against the target of Rs500bn.

The cut-off yields for 3-month, 6-month, and 12-month T-bills saw an increase of 129, 114, and 96 basis points to stand at 14.79%, 14.99%, and 14.81%, respectively.

The market had offered Rs708bn, out of which the government accepted bids amounting to Rs672bn.

The total amount raised for 3-month T-bills was Rs369.32bn, Rs140.73bn for 6-month, and Rs162.40bn for 12-month.

“The recent T-bills auction yields reflect market anticipation of further interest rate hikes. The average spread between 3-month, 6-month 12-month T-bills and policy rate used to be 0.61%, 1.04%, 1.29%, respectively during the last 1 year which in the today's auction has widened to 2.54%, 2.74%, 2.56%,” Sana Tawfik, Analyst at Arif Habib Limited noted.  

It hints toward the emergence of recessionary pressures on the economic growth front. Moreover, with the pressure on the external account, reserves depleting, depreciation of the currency and higher inflation, markets are bidding at higher rates, hence, leading to an increase in cut-off yields, she added.

On another note, within the money market, the six-month KIBOR reached 14.23% today, marking the highest rate since last thirteen years. 

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