Govt borrows Rs111b through treasury bills

Yield on six-month papers rises.

KARACHI:

The government borrowed Rs110.62 billion through an auction of market treasury bills of three, six and 12-month maturities, which was around 23 per cent more than the target of Rs90 billion for the auction, indicating banks are increasingly focused on investing in risk-free government papers.

However, cut-off yield for three and 12-month bills stood unchanged at 13.48 and 13.91 per cent respectively, showed data released by the State Bank of Pakistan (SBP) on Wednesday. Return on six-month papers rose to 13.76 per cent compared to 13.74 per cent in the previous auction held on June 28.

In six-month bills, investors including banks, institutions and others invested the highest amount of Rs67.35 billion while in three and 12-month bills they injected Rs8.33 billion and Rs34.93 billion respectively.

According to analysts, banks have been investing heavily in government papers, including investment bonds, as they offer a lucrative and risk-free avenue for investment, but this leaves little for private sector businesses. They say the government too is interested in borrowing more from the domestic market, in the face of reduced inflow of external assistance, to finance its budget deficit.

This year, the government has set the budget deficit target at four per cent of gross domestic product. According to SBP’s auction calendar for the first quarter (July-September) of 2011-12, the government is expected to borrow Rs750 billion through sale of treasury bills.



Published in The Express Tribune, July 14^th, 2011.