Pakistan T-bills cut-off yields decline by up to 148 basis points in Aug 21 auction

The cut-off yields of Pakistan treasury bills (T-bills) declined by up to 148 basis points (bps) in the auction held on August 21, data from the State Bank of Pakistan (SBP) which conducts the auction, showed.

Moreover, investors showed massive interest, submitting bids amounting to eight times the government's target amount.

Investors placed bids worth PKR 1,206 billion, with the highest interest in the 12-month bills which attracted PKR 524 billion. The six-month and three-month papers received bids of PKR 403 billion and PKR 279 billion, respectively.

The cut-off yield for the three-month bills saw the steepest decline, dropping by 148 bps to 17.49% from 18.97% in the previous auction.

Meanwhile, the cut-off yields of six-month and 12-month papers fell by 101 and 74 bps, respectively, with the six-month paper at 17.74% and the 12-month paper at 16.99%.

These cut-off yields are now at their lowest in 20 months, with the yields for the three-month and six-month bills last seen at this level in January 2023, and that for the 12-month bills in December 2022.

The decline in T-bill cut-off yields indicates that investors expect the SBP to cut the interest rate further in its meeting on September 12 on the back of easing inflation and a positive real interest rate for the last five months.

The government successfully raised PKR 397 billion, surpassing the target of PKR 150 billion. The largest amount — PKR 171 billion — was raised through six-month papers, followed by PKR 147 billion from 12-month papers and PKR 79 billion from three-month papers.