T-bills yields decline

KARACHI: Treasury bills yields fell across the board at an auction on Wednesday after the State Bank of Pakistan kept interest rates unchanged, with investors expecting borrowing costs to stay steady in the coming months in line with the SBP’s forward guidance.

The cut-off yield on three-month treasury bills decreased by 15 basis points (bps) to 10.30 percent, the yields on the six-month paper shed 68bps to 10.69 percent. The 12-month yield also dropped by 57bps to 10.93 percent, the SBP’s auction result showed.

In the latest auction, the government raised Rs729.3 billion versus the target of Rs650 billion.

“This is right after the monetary policy statement where SBP maintained the policy rate and highlighted that the current real interest rates on a forward-looking basis are appropriate,” said an analyst at Topline Securities, referring to the decline in yield of the treasury bills. The SBP kept the policy rate unchanged at 9.75 percent. It made it increasingly clear that interest rates are almost at peak levels.

It expects fiscal adjustments under the recently approved mini-budget to help contain demand side pressures. The SBP in its monetary policy statement said since the last meeting, some developments show signs of falling inflation supported by demand-moderating measures.

“Recent economic growth indicators are appropriately moderating to a more sustainable pace. While year-on-year headline inflation is high and will likely remain so in the near-term due to base effects and energy prices, the momentum in inflation has slowed with month-on-month inflation flat in December compared to a significant rise of 3 percent in November,” it added.