SBP auction sells Rs257.74bn in Treasury Bills, cut off yield jumps by up to 206bps

February 23, 2023 (MLN):  The State Bank of Pakistan (SBP) on Thursday conducted an auction of Market Treasury Bills (MTBs) worth Rs257.74 billion for 3, 6, and 12 months while the auction target was set at Rs300bn against a maturing amount of Rs289bn.

However, the SBP managed to sell Rs133bn, Rs173.74bn, and Rs182bn worth of MTBs as the cut-off yield for 3, 6, and 12 months jumped by 195, 206, and 184 basis points to 19.95%, 19.9%, and 19.79%, respectively.

This sharp increase in yields suggests an imminent hike in the policy rate.

The SBP received bids worth Rs246.74bn for 3 months, Rs50bn for 6 months, and Rs50bn for 12 months, out of which it accepted Rs151.74bn, Rs12bn, and Rs10bn, respectively. In addition, the SBP picked up Rs84.01bn from the non-competitive auction, making the total amount accepted Rs257.74bn.

This move by the SBP indicates that the central bank is adopting a hawkish stance to curb inflation, which has been steadily rising in recent months.

With the hike in policy rate expected in the near future, borrowers may face higher borrowing costs, which could negatively impact economic growth.

On the other hand, savers could benefit from higher returns on their investments.

It is important to note that further monetary tightening is one of the remaining conditions of the IMF that need to comply to unlock the IMF deal. 

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