State Bank borrows Rs187b in T-bills auction

KARACHI: The State Bank of Pakistan (SBP) auctioned treasury bills worth Rs187.45 billion on Wednesday, meeting the target of Rs185 billion and indicating the continuing need for borrowing by the government from the domestic market.

Among three, six and 12-month bills sold in the auction, banks, development finance institutions, corporate players and individuals parked most of the money in the three-month paper totaling Rs167.81 billion.

Cut-off yields on the bills also rose. For three-month paper, the yield increased to 13.66 per cent compared to 13.43 per cent in the previous auction held on January 12. For six-month bills, the return on investment rose to 13.71 per cent compared to 13.55 per cent in the previous auction.

In the case of 12-month bills, the return on investment was 13.88 per cent. In the previous auction, all bids for the 12-month paper had been rejected.

Head of Research InvestCap, Khurram Schehzad, said the government is borrowing heavily from domestic sources in a bid to meet growing expenditures due to defence spending and debt servicing. “The need for extensive borrowing from the domestic market arises in the wake of insignificant flow of money from foreign sources,” he said.

Schehzad said banks did not want to block their money for a long period and preferred three-month treasury bills which gave a handsome return. “There is not much difference between yields of three-month and 12-month papers,” he said.

Published in The Express Tribune, January 27^th,  2011.