High yields, oil prices cited as risks to rate cut expectations; gold down Rs10,000/tola
State Bank of Pakistan. Photo: File
KARACHI:
The State Bank of Pakistan (SBP) on Wednesday raised Rs581.7 billion (face value) through the auction of Market Treasury Bills (T-bills), exceeding its target of Rs550 billion amid a modest uptick in short-term yields.
Total bids of Rs915 billion were received, reflecting strong participation from market players, with the central bank accepting both competitive and non-competitive offers to meet the government’s near-term financing requirements.
Yields in the latest auction rose between 21 and 39 basis points compared to the previous auction, broadly aligning with secondary market trends and indicating cautious investor sentiment.
In the one-month tenor, the SBP accepted Rs95 billion against a target of Rs50 billion at a cut-off yield of 10.50% and weighted average yield of 10.32%. For the three-month paper, Rs260 billion was accepted against a target of Rs200 billion at a cut-off yield of 10.50%, while the weighted average yield stood at 10.42%.
The six-month T-bills saw lower participation, with Rs71 billion accepted against a target of Rs100 billion at a cut-off yield of 10.74% and weighted average return of 10.72%. Meanwhile, in the 12-month tenor, the central bank raised Rs155 billion versus the target of Rs200 billion at a cut-off yield of 10.99% and weighted average return of 10.91%.
Market participants noted that the rise in cut-off yields signals evolving expectations on the interest rate outlook. Maaz Azam, Head of Research at Optimus Capital Management, termed the increase in yields “significant,” attributing it to rising oil prices, emerging inflationary pressures and diminishing expectations of a near-term policy rate cut. He added that risks of a potential increase in the policy rate cannot be ruled out if inflationary momentum persists.
The total amount raised will help the government manage short-term liquidity needs and roll over maturing domestic debt.
Separately, in the Pakistan Investment Bonds (PIB) Floating Rate (Semi-Annual) auction for the 10-year tenor, the SBP rejected all bids against a target of Rs25 billion.
As no acceptance was reported, the cut-off spread remained unchanged at 0% over the benchmark, compared to the previous spread of 0.55%, indicating limited appetite or pricing mismatch for the floating-rate instrument at the offered levels.
Furthermore, the Pakistani rupee posted a marginal gain of 0.01% against the US dollar in the inter-bank market on Wednesday, closing at 279.42, up Rs0.03 from Tuesday’s close at 279.45.
Meanwhile, the price of 24-karat gold per tola decreased by Rs10,000 and it was sold at Rs539,962, the All-Pakistan Sarafa Gems and Jewellers Association reported. In the international market, the price of gold fell by $100 to $5,172 from $5,272, whereas silver increased by $1 to $85.20, the association added.
