T-bill yields jump beyond policy rate

KARACHI: The government on Wednesday raised the cut-off yields on treasury bills by up to 75 basis points, significantly surpassing returns on risk-free papers above the State Bank of Pakistan’s policy rate of 11.5 per cent.

In the latest T-bill auction, the government raised profit rates on all tenors, fuelling speculation in the financial market about a possible interest rate hike at the next SBP Monetary Policy Committee meeting on Oct 26.

The largest increase of 75bps was recorded in the benchmark six-month treasury bills, with the rate rising to 12.45pc from 11.70pc in the previous auction held on Sept 16. The government raised Rs88.3 billion through the six-month bills.

The rate on three-month T-bills rose 61bps to 11.99pc, up from 11.38pc in the previous auction. The government raised Rs143.86bn for this tenor.

Govt raises returns on different tenors by up to 75bps

Govt raises returns on different tenors by up to 75bps

Despite the smallest increase of 45bps, the 12-month T-bill rate reached 12.49pc, 99bps above the SBP’s policy rate. The wide gap between T-bill yields and the policy rate surprised market participants and fuelled speculation about a possible policy rate hike. The government raised Rs29.66bn through this tenor.

Another indicator of a possible interest rate hike is rising inflation, which stood at 11.1pc........

© Dawn Business