Pakistan’s treasury bills’ yields decline by up to 140 basis points

The State Bank of Pakistan (SBP) conducted a Market Treasury Bills (T-Bills) auction on Wednesday, resulting in a decrease in cut-off yields for 3-month, 6-month, and 12-month bills by 140 basis points (bps), 84 bps, and 64 bps, respectively.

The SBP raised a total of PKR 820 billion, surpassing the target of PKR 400 billion, against a maturity of PKR 893 billion.

Investor bids reached PKR 2,189 billion, resulting in a bid cover ratio of 5.5x, indicating strong market liquidity.

The new yields are now 13.90% for 3-month, 13.50% for 6-month, and 13.10% for 12-month bills, down 440 bps from the 17.50% benchmark interest rate.

Despite the overall decrease, yields have risen by 7 bps, 27 bps, and 10 bps compared to the secondary market.

It may be mentioned here the State Bank of Pakistan (SBP) will announce monetary policy statement on November 4^th. Declining yields suggest there is room for further monetary easing.

There is a consensus that central bank will cut its policy rate by 200 basis points, making it the fourth consecutive reduction since June due to lower inflation, a low current account deficit, and higher remittances.

The previous three cuts have already reduced the benchmark interest rate by 450 basis points, bringing it down from 22% to 17.5%.