Markets

Pakistan slashes T-bill cut-off yields to 19-month low

The central bank raised around PKR 350 billion against a target of PKR 210bn

Pakistan slashes T-bill cut-off yields to 19-month low

A stack of Pakistani currency notes

Shutterstock

Pakistan's central bank trimmed the cut-off yields on three-month, six-month, and one-year treasury bills (T-bills) by 50 to 54 basis points (bps), a 19-month low.

The State Bank of Pakistan (SBP) conducted a T-bills auction on Wednesday through which it raised around PKR 350 billion against a target of PKR 210bn for maturity of PKR 205bn.

The central bank received bids totaling PKR 1,778bn for the auction.

The cut-off yields were trimmed by 52bps to 18.97% on three-month bills, 54 bps to 18.75% on six-month bills, and 50 bps to 17.74% on one-year bills.

The central bank raised PKR 63bn, PKR 111.29bn, and PKR 180.37bn from three-month, six-month, and one-year bills, respectively.

T-bills are short-term securities issued by the government to raise cash, and have tenures of 3 months, 6 months, and 12 months. They are considered to be low-risk investments since they are backed by the sovereign and have a fixed rate of return called the yield.

The yield depends on the country’s interest rate, market sentiment, and future expectations. After the bidding time for investors has ended, a certain cut-off yield is announced. All bids that are below the cut-off yield are then accepted. When the T-bill’s tenure has matured, the investor is returned the original amount plus the interest (yield).

The three-month bills' cut-off yield is the lowest since the Feb 8, 2023 auction while down by 553bps from the peak of 24.50% recorded during the Sep 6 auction.

Similarly, the six-month cut-off yield is also the lowest since the Feb 8, 2023 auction while down by 604bps from the peak of 24.79% during the Sep 6 auction.

Meanwhile, the one-year cut-off yield is the lowest since the December 28, 2022 auction while down by 733bps from the peak of 25.07% during that auction.

The central bank reduced the interest rate by 225 bps to 19.5% last month, easing the monetary policy after almost four years as inflation started to trickle down.

Comments

See what people are discussing

More from Business

Mobile phone production in Pakistan drops 8% in November

Mobile phone production in Pakistan drops 8% in November

Total mobile phone demand in Pakistan to increase 44% to 32.9 million units in 2024