SBP sells T-bills worth Rs185bn, yields drop by up to 62bps

January 24, 2024 (MLN): The State Bank of Pakistan (SBP) conducted an auction on Wednesday in which it sold Market Treasury Bills (MTBs) worth Rs184.66 billion for 3,6 and 12 months against a target of Rs225bn.

Cut-off yields for 3, 6, and 12 months were 20.4997%, 20.4000%, and 20.2298%, depicting a fall of 50bps, 56bps, and 62bps in 3 month, 6 month, and 12 month papers, respectively.

Muhammad Sohail, CEO of Topline Securities, said this was a "surprise drop" in the yields.

He was of the view that this happened because the government did not pick big amount in yesterday's Sukuk Auction, causing yields to stabilize.

Both these auctions indicate a chance of possible rate cut despite a slower-than-expected decline in inflation, he added.

The same views were echoed by Shahid Ali Habib of Arif Habib Limited, who stated that a rate cut in the upcoming Monetary Policy Committee meeting is possible.

Rates in the Tbills auction witnessed a decline as financial institutions with surplus liquidity opted to park their excess funds, leading to lower bids, he said.

"We can see a possible small rate cut, witnessing the recent auctions for both Tbills and Ijara Sukuk," he opined.

Total amount offered was Rs1.121tr out of which the SBP accepted Rs185bn.

The SBP received bids worth Rs446.56bn for 3 months, Rs62.92bn for 6 months, and Rs611.97bn for 12 months out of which it accepted Rs8.05bn for 3 months, Rs2.65bn for 6 months, and Rs91.5bn for 12 months.

In addition, the SBP picked up Rs82.46bn from the non-competitive auction, making the total amount accepted Rs185bn.

The bid-to-cover ratio, which shows the amount of bids received versus the amount sold, dropped to 6.07 as against 9.73 in the previous auction.

To note, the central bank in the last auction held on January 10, 2024 sold MTBs worth Rs283bn.

Cut-off yields for 3, 6, and 12 months were 20.9996%, 20.9601%, and 20.8449%.

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