Govt borrows Rs308 billion through MTB auction

RECORDER REPORT

KARACHI: A cash-strapped PPP-led coalition government borrowed Rs308 billion on Wednesday through auction of Market Treasury Bills (MTBs) to meet its financial requirements.

This is the first and over the target borrowing through MTBs during the fiscal year 2012-2013 (FY13). For the first auction, the federal government had set a target of Rs. 225 billion, but it borrowed an amount of Rs. 308 billion.

The auction, conducted by State Bank of Pakistan (SBP), attracted heavy participation. According to SBP, the MTBs' first auction of FY13 has fetched over Rs. 416 billion worth bids.

In response to the SBP Tenders for Sale of 3-months, 6-months & 12-months of Government of Pakistan Market Treasury Bills, overall Rs 416.326 billion with a realized amount of Rs. 386.250 billion bids were received through Primary Dealers from July 10, to July 11, 2012. However, bids worth Rs 307.916 billion with a realized amount of Rs 285.994 billion were accepted.

Most of participation was  witnessed in the 6- and 12-month period MTBs, which depicts that banks are expecting some cut in the key policy rate in near future.

A cut-off yield of 11.8742 percent has set for the sale of 3-month MTBs and bids accepted worth Rs 52.081 billion with realized amount of Rs. 50.696 billion.

For the 6-month, the SBP accepted Rs. 132.635 billion bids with 11.9195 percent cut-of yield. Similarly, a cut-of yield of 11.9396 percent was set for the 12-month period T-bills with bidding amount of Rs. 123.2 billion.

Analysts said that the two positive developments, firstly reduction in the international oil prices and secondly reaffirm relationship with the US, have somewhat reduced the expected pressure on the external and fiscal accounts from earlier assessment.

Further, support to the idea come from soft inflation numbers expected in coming few months, despite incorporating the Ramadan that has provided the central bank the room to reassess its stance and cut the policy rate from 12 percent, while still keeping the real discount rate in the positive territory, they said.

Participation in the longer tenure in first T-bills auction has, further strengthened the expectation of rate cut, they added.