Investors buy Rs122b worth of treasury bills

Longer term papers attracted the highest amount.

KARACHI:

Banks and financial institutions invested heavily in government securities as they bought Rs122.13 billion worth of market treasury bills in an auction held on Wednesday, which was almost equal to the target of Rs120 billion set by the central bank, according to data released by the State Bank of Pakistan (SBP).

The government is increasingly relying on domestic sources for financing its budget deficit as external flows have slowed down following suspension of International Monetary Fund’s $11.3 billion loan programme in May last year. SBP has fixed a borrowing target of Rs750 billion for the first quarter (July-September) of the current fiscal year through sale of treasury bills.

The risk-free government securities are an attraction for banks, which invest heavily in these papers, curtailing credit facilities to private sector borrowers.

In the fortnightly auction of treasury bills, investors, which also included individuals as well, parked the highest amount of Rs66.90 billion in 12-month bills at a cut-off yield of 13.92 per cent. In the previous auction held on July 13, return on the paper was slightly lower at 13.91 per cent.

The interest rate of 13.92 per cent was close to the benchmark 14 per cent discount rate, which SBP charges on lending to banks. SBP will announce its bi-monthly monetary policy on July 30 and analysts expect the central bank to keep the discount rate unchanged.

In six-month bills, Rs41.13 billion was invested at a return of 13.78 per cent compared to the yield of 13.76 per cent in the previous auction. In three-month papers, Rs14.10 billion was invested at interest rate of 13.53 per cent against the previous 13.48 per cent.







Published in The Express Tribune, July 28^th, 2011.