Government Raises Rs. 326 Billion Through T-bills as Yields Drop

The government raised Rs326 billion through the sale of Treasury bills (T-bills) as yields decreased by up to 41 basis points, driven by expectations of a 100-basis-point rate reduction in the upcoming State Bank of Pakistan (SBP) policy review on January 27.

The auction, with a target of Rs350 billion, attracted Rs1.4 trillion in bids, while the maturing amount stood at Rs515 billion. Following the auction, the yields for three-month T-bills fell to 11.58%, six-month yields dropped to 11.4%, and 12-month yields went down to 11.38%.

Of the total bids, the government raised Rs220.3 billion through competitive bidding and Rs105.2 billion through non-competitive means, bringing the total raised amount to Rs325.5 billion.

In terms of maturities, the government collected Rs3.3 billion through three-month T-bills, Rs5 billion via six-month bills, and Rs212 billion through 12-month bills.

The funds raised were below the target amount, as the government secured Rs325.5 billion against the Rs350 billion target for the auction.

Market experts generally expect the SBP to cut interest rates by 100 basis points, citing falling inflation. A brokerage report suggests that the consumer price index (CPI) for January is forecasted to drop to 2.8%, marking the lowest level since November 2015, primarily due to a high base effect, despite a 0.6% month-on-month increase.

Last month, the SBP reduced the policy rate by 200 basis points to 13%, the fifth consecutive rate cut since June 2024, bringing the total rate reductions for 2024 to 900 basis points. Analysts predict that the easing cycle will continue beyond January.