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KARACHI: The cut-off yield on short-term government papers declined up to 50 basis points (bps) in the auction held Wednesday.

On behalf of the government of Pakistan, the State Bank of Pakistan (SBP) conducted the auction for Market Treasury Bills (MTBs) on November 15, 2023, 2016 for the sale of 3-month, 6-month and 12-month MTBs.

Healthy participation was witnessed in the T-bills auction and overall, bids amounting to Rs 4 trillion with realized value of Rs 3.456 trillion were received for the sale of short-term government security papers.

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As the market is expecting rate cut in the key policy rate in coming months, most of the bids were received for the one-year T-bills as financial institutions were keen to park their liquidity at higher rates.

The received bids included Rs 2.6 trillion (face value) for 12-month, Rs 1.046 trillion for 3-month and 6-month MTBs fetched bids worth Rs 354 billion.

Out of the received bids, the federal government accepted bids amounting to Rs 1.16 trillion (including Rs 183 billion of non-competitive bids) as against the target of Rs 1.5 trillion for this auction.

The cut-off yields of all tenure MTBs have slightly declined in the wake of expected cut in the interest rate.

The cut-off yield of 3-month MTBs was set at 21.4997 percent, down by 45 bps with an accepted amount of Rs 409 billion. For the 6-month, an amount of Rs 41 billion was raised and its cut-off yield was declined by 49 bps to 21.4999 percent.

Similarly, the cut-off yield of 12-month T-bills was fixed at 21.5001 percent, down by 50 bps and the borrowed amount was Rs 529 billion.

Borrowing amount on account of non-competitive bids included Rs 64 billion of 3-month MTBs, Rs 51.29 billion of 6-month and Rs 67 billion of 12-month T-bills.

In addition, the SBP conducted an auction of long-term Pakistan Investment Bond Floating Rate (PFL) Semi-Annual Auction and borrowed Rs 432.44 billion for the federal government. This included Rs 408 billion of competitive and Rs 24 billion non-competitive bids.

Another quarterly auction for the sale of Pakistan Investment Bond Floating Rate (PFL) was held on Wednesday and Rs 64 billion were raised including Rs 60 billion of competitive and Rs 4 billion of non-competitive bids.

Copyright Business Recorder, 2023

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