Govt raises Rs835 billion through T-bills auction

The government raised Rs835 billion through the treasury bills (T-bills) auction on Wednesday, surpassing its target of Rs700 billion. 

The auction witnessed strong demand, particularly for 12-month tenor bills, as market participants anticipated an upcoming interest rate cut.

Despite the market’s anticipation of a rate cut, the cut-off yields for T-bills remained unchanged at 17.47% for three months, 17.74% for six months, and 16.99% for 12-month tenors. 

The auction saw significant participation in the 12-month tenor, with bids totaling Rs468.4 billion, reflecting strong interest in locking in longer-term investments.

The auction results aligned with market expectations, as many financial experts had already factored in the likelihood of a rate reduction by the State Bank of Pakistan (SBP). 

The central bank is set to announce its new monetary policy on September 12, with analysts predicting a significant interest rate cut following a sharp drop in inflation.

Inflation fell to single digits in August, reaching 9.6%, prompting speculation of a cut of up to 200 basis points (bps) in the SBP policy rate. However, most experts anticipate a more moderate reduction of 150bps, bringing the rate down from its current 19.5%.