KARACHI: Interest rate on short-term government papers rose to 19.95 percent in the auction held on Wednesday. The State Bank of Pakistan (SBP) conducted the auction for Government of Pakistan Market Treasury Bills (MTBs) on February 22 and received bids worth Rs 346.745 billion.

The federal government aggressively borrowed Rs258 billion at a higher cutoff yield. The cut-off yield of 3-month was set at 19.95 percent and government raised Rs 152 billion. Overall, the cut-off yield increased by almost 2 percent compared to previous auction.

Half-yearly MTBs interest rate was set at 19.90 percent and the government borrowed Rs 12 billion. In addition, the cut-off yield of one year T-Bills rose to 19.7 percent for Rs 10 billion.

Govt raises Rs1.6trn through MTBs’ sale

Analysts said that the market seems to be expecting a significant increase in interest rates, as is evident from the participation at such high rates. But even strange is the fact that the SBP lifted the offered amount till such high rates.

An analyst Samiullah Tariq said that for the 3-month T-Bills, the weighted average participation was at a yield of 19.2652 percent. This is substantially lower than the cut-off rate of 19.95 percent.

Usually, the difference between the cut-off rate and weighted average rate isn’t more than 15 to 20 bps for the 3-month T-Bills, he added.

Copyright Business Recorder, 2023