June 19, 2019 (MLN): The latest Market Treasury Bill auction failed to get any serious attention from market participants as the SBP only managed to sell T-Bills worth Rs.27.407 Billion for 3 months against an auction target of Rs.600 Billion.
However, with the maturing amount being relatively low, only Rs.11.797 Billion, which should not result in the Government having to borrow from the SBP to repay the amount.
The reluctance of financial institutions to invest in T-Bills flies in the face of recent government pronouncements about not borrowing from the central bank anymore. With the market being well aware of the interest rates far from having peaked, as the Budget document has the Finance Ministry disclosing that inflation is expected to increase to between 11 and 13 percent next year.
Unless something drastic happens, the pattern of recent auction shows that bank and other financial institutions will continue to invest only in the short tenor (3 months), with highest participation being witnessed immediately after a policy rate hike and gradually tapering off in subsequent auctions.
The SBP received bids worth Rs.44.874 Billion for today’s auction out of which it accepted Rs.3.874 Billion for 3 months, with the cut off yield relative unchanged at 12.7491 percent. Bid for 6 and 12 months were rejected.
The SBP accepted Rs. 23.533 Billion in Non-Competitive Bids making the total accepted amount Rs.27.407 Billion.
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