Another rate hike on cards? Cut-off yields surge by up to 120bps in MTB auction

March 09, 2023 (MLN): The government on Wednesday raised Rs1.56 trillion from the auction of market treasury bills, against a target of Rs1.8tr registering a hike in cut-off yield by upto 120bps to 20.98%, result data published by the State Bank of Pakistan (SBP) showed. 

Amid rising interest rate spree, the cut-off yield for 3, 6, and 12 months increased by 105, 95, and 120 bps to 20.99%, 20.84%, and 20.98%.

The total amount offered was Rs2.44tr out of which the SBP accepted Rs1.5tr. The SBP received bids worth Rs1.9tr for 3 months, Rs238.28bn for 6 months, and Rs289.41bn for 12 months out of which it accepted Rs1.5tr, Rs0.28 billion, and Rs2.02bn respectively.

In addition, the SBP picked up Rs62.32bn from the non-competitive auction, making the total amount accepted Rs1.57tr.

Experts are of the view that the record hike in cut-off yeilds anticipated the further rate hike in the upcoming monetary policy which is due on April 4, 2023. 

To note, the Monetary Policy Committee (MPC) of the SBP in its meeting held on March 02, 2023, decided to raise the policy rate by 300bps to 20% to arrest the inflationary pressure. 

The outcome of the meeting was in line with the market expectations where the analyst fraternity believed that the monetary policy committee of SBP will go for an aggressive hike of 200-300 bps to unlock IMF deal.

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