T-bill yields decline ahead of MPS

October 6, 2022 (MLN): Cut-off yields of three-,six- and 12-month T-bills declined during the MTB auction held on Wednesday as investor participation remained high amid fears of a rate cut as hinted by the new Finance Minister Ishaq Dar after taking charge of affairs at the ministry. 

Auction data released by the State Bank of Pakistan (SBP) showed participants bid Rs1.23 trillion, Rs246 billion, and Rs494bn in three-,six- and 12-month T-bills, of which the governemnt accepted Rs539bn, Rs72bn and Rs209bn at cut-off yield of 15.74%, 15.75% and 15.75%, respectively. 

"After a gap of two months T-Bill auction witnessed a drop in cut-off yields in today’s auction," said Mohammad Sohail of Topline Securities. "Lower than anticipated Sep CPI numbers and expectations of no change in Policy rate made investors accumulate T-Bills at lower than last auction yield. Yields fell by 24-26 basis points in today's auction. Against a target of Rs650bn government picked Rs877bn."

The trend of market participation and overall quantum of bids suggest the participants are anticipating either a cut or atleast status quo in the upcoming monetary policy announcement due on Monday (October 10).