KARACHI – With its rising appetite for budgetary borrowing from the scheduled banks, the government has increased the cut-off yield on three and six months treasury bills by 18 and nine basis points, respectively. The government seems to have shifted its borrowing focus to the scheduled banks, perhaps in a bid to avoid the State Bank loans that, analysts believe, are essentially inflationary.
According to the central bank, government borrowing from scheduled banks is made mainly through fortnightly auctioning of Market Treasury Bills (MTB) of 3, 6 and 12-month maturities.
The State Bank of Pakistan (SBP), conducting its open market operations on Wednesday, accepted the bids for a realised amount of Rs 155.417 billion for three and six-month treasury bills at a respective cut-off yield of 13.4389 and 13.5527 percent. Given the unsettling political and security situation at home and abroad, bidders refrained from settling on long-term investments as their offers for 12-month MTBs stood lowest at Rs 8.783 billion of Rs 10 billion face value.
Offers for quarterly (three-month) and semi-annual (six-month) MTBs were, however, higher at over Rs 166.633 billion and Rs 15.726 billion, respectively, reflecting the investors’ inclination towards short-term investment. The bidders came up with an offer totalling Rs 191.143 billion at Rs 198.560 billion face value. The central government, rejecting bids for the 12-month offers, accepted the bids amounting to over Rs 155.417 billion of Rs 160.560 billion face value.
The State Bank set a cut-off yield of 13.4389 and 13.5527 and the average weighted yield of 13.3746 and 13.4954 percent, respectively, for the three and six months treasury bills.
According to industry sources, the new rates of return (cut-off yield) were up by 18 and nine basis points, respectively. SBP Governor Shahid H Kardar has, reportedly, said that the central bank had transferred its right to decide the fate of treasury bills auctions to economic managers in the federal government. Additionally, sources have said that the government has missed its Rs 175 billion fund-raising target through managing to raise Rs 155.417 billion in the current auction. However, despite repeated warnings from all sides, the PPP-led coalition government in Islamabad, apparently, does not seem able to reduce its dependence on the banking system for its budgetary needs and has raised over Rs 155 billion from scheduled banks at an increased cut-off yield.
