Government secures Rs259 billion in T-bill auction as yields edge higher

KARACHI: The government has successfully raised Rs259 billion through the auction of Market Treasury Bills on Wednesday, although this amount fell short of the targeted Rs350 billion.

The raised amount was lower than the Rs371 billion due for maturity. Yields experienced a slight uptick across all tenors during the auction. The yield on the three-month Treasury bill increased by 3 basis points (bps) to reach 11.83 percent.

Similarly, the yield on the six-month Treasury bill rose by 17 bps to 11.67 percent, while the yield on the 12-month bill saw an increase of 6 bps, reaching 11.65 percent.

Analysts attribute the rise in Treasury bill (T-bill) yields to persistent concerns surrounding the current account deficit and the depreciation of the rupee.

Market participants harbour worries that the State Bank of Pakistan (SBP) may hesitate to lower interest rates or make only a modest cut during the upcoming monetary policy meeting set for March 10. Pakistan’s current account recorded a deficit of $420 million in January, contrasting with a surplus of $474 million the previous month.

Pakistan sees net outflow of $38.5 million from foreign investors in T-bills

In a recent move, the SBP lowered its key interest rate by 100 basis points to 12 percent, citing declining inflation levels. January saw a reduction in Pakistan’s consumer inflation rate to 2.4 percent year-over-year, marking the lowest rate seen in over nine years, down from 4.1 percent in December. Analysts anticipate that inflation might continue to decelerate, with projections suggesting it could fall below 2.0 percent in February.

In its last monetary policy statement, the central bank indicated that inflation in the near term would likely remain volatile, with expectations of a rise approaching the upper limit of the target range as the fiscal year 2025 comes to a close. The SBP forecasts that average headline inflation for FY25 will range between 5.5 and 7.5 percent.