KARACHI: The treasury bill yields saw a mixed response in Wednesday’s auction, with the three-month T-bill rate climbing 26 basis points to 21.6601 percent, while the six-month yield held steady at 20.3944 percent.
The twelve-month paper experienced a significant increase, with yields rising 60 basis points to 20.8998 percent. The government raised Rs704 billion through the auction of T-bills, which was higher than the original target of Rs340 billion.
The market anticipation for an upward yield adjustment was high, especially after the State Bank of Pakistan (SBP) decided to keep the policy rate unchanged at 22 percent earlier this week.
The SBP Governor’s recent remarks suggested a conservative stance towards future rate cuts, which was mentioned by brokerage Chase Securities in its pre-auction analysis. The auction’s smaller scale did not deter the government’s funding success, with competitive rates being secured amidst current market conditions.
The SBP opted for a cautious approach, maintaining the status quo on interest rates. While expressing optimism about a gradual decline in inflation, the SBP emphasised the need for vigilant monitoring, citing potential impacts from external factors and necessary fiscal adjustments.
In a monetary policy statement, the central bank noted that although inflation began to reduce in the second half of the fiscal year 2023–2024 and decreased sharply in February, it is still at a high level and that risks to the outlook are there due to strong inflation expectations. “This warrants a cautious approach and requires continuity of the current monetary stance to bring inflation down to the target range of 5 – 7 percent by September 2025,” the SBP’s monetary policy committee (MPC) said in a statement.
The headline inflation rate decreased from 28.3 percent in January to 23.1 percent in the previous month due to better food supplies, moderating global commodity prices and favourable base effect.
Core inflation, which had remained stubborn, also dropped from 20.5 percent in January to 18.1 percent in February, while food inflation continued its downward trajectory. Although year-on-year energy inflation declined in February, according to the SBP, changes in administered energy prices have continued to directly and indirectly fuel inflation.
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