The government raised Rs397 billion through a recent auction of Treasury Bills (T-bills), exceeding the initial target of Rs150 billion.
According to the data from the State Bank of Pakistan (SBP), the cut-off yields were reduced to 17.4902% for 3-month, 17.7449% for 6-month, and 16.9999% for 12-month T-bills. This decline in cut-off yields on market T-bills reflects the expectations of a further interest rate cut by the central bank due to easing inflation pressures.
The 3-month rate dropped to 17.49%, the lowest since January 2023; the 6-month rate fell to 17.74%, nearing January levels; and the 12-month rate decreased to 16.99%, the lowest since December 2022.
The total amount offered was Rs1.21 trillion, with the SBP receiving bids of Rs278.72 billion for 3 months, Rs403.26 billion for 6 months, and Rs524.32 billion for 12 months. The SBP accepted Rs52.01 billion for 3 months, Rs144.05 billion for 6 months, and Rs125.12 billion for 12 months.
The SBP reduced its benchmark interest rate by 100 basis points to 19.5% last month, marking its second consecutive rate cut. Since June, the rate has been lowered by a total of 250 basis points.
The Consumer Price Index (CPI) for July was 11.1%, lower than the current policy rate, widening real interest rates. The decline in T-bill yields is attributed to expected rate cuts in upcoming monetary policy meetings, with inflation projected to drop to single digits by August 2024.
The SBP’s Monetary Policy Committee will announce its next interest rate decision on September 12. The SBP forecasts inflation to remain between 11.5% and 13.5% for FY2025.
