February 27, 2019 (MLN): The State Bank of Pakistan conducted an auction on Wednesday in which it sold Market Treasury Bills worth Rs.500.662 billion for 3 months. The cut off yield remained unchanged at 10.55 percent.
Auction target was Rs.2,000 Billion against a maturing amount of Rs.2,063.481 Billion, however the SBP received no bids for the 6 and 12 month T-Bills and only Rs.528.928 billion for 3 months.
The SBP picked up Rs.472.528 Billion from the competitive auction while non-competitive bids generated a further Rs.28.084 Billion making the total accepted face value Rs.500.662 Billion.
The pattern of auction has been repeating ever since the Central Bank started raising interest rates in January 2018, with only the first auction after a rate hike generating interest and that only for the shortest tenor Treasury bill and bids tapering off in subsequent auctions as the market expects the interest rates to continue moving upwards, with the SBP continuing its policy of monetary tightening.
The broad Money (M2) data published last week showed the government’s borrowing from the central bank had declined by Rs.2.17 trillion following the previous MTB auction. However, the lack of participation will once again force the Government to borrow from the Central Bank to meet the target amount for this auction.
