Commercial banks offer Rs2,013b financing

Commercial banks offered cash-strapped government financing of Rs2,013 billion after two months of maintaining prices at a record high. The move comes after a slight drop in inflation readings was seen and the finance minister expressed a liking for a low benchmark interest rate in Pakistan.

The government borrows from commercial banks by selling sovereign debt securities, including T-bills.

The cut-off yields (banks’ price of financing to the government) on three to 12-month T-bills slashed in the range of 24-26 basis points to 15.73-15.75% in the latest bond auction. The cut in the rate prompted the government to borrow a higher amount at Rs877 billion against a target of Rs650 billion.

Speaking to the Express Tribune, Topline Securities CEO Muhammad Sohail said, “After a gap of two months T-Bill auctions witnessed a drop in cut-off yields in today’s (Wednesday) auction.”

“Lower than anticipated September CPI (monthly inflation reading) numbers and expectations of no change in the central bank’s key policy rate forced investors to accumulate T-Bills at lower yields as compared to the last auction,” he added.

A senior analyst added that in anticipation of the central bank announcing no change in the benchmark policy rate on Monday (October 10) commercial banks were encouraged to lower their price.

Earlier, Finance Minister Ishaq Dar expressed an indication to soften the policy rate standing at 15% at present. “Dar’s comments have sent signals to the market that even if the rate is not slashed, it will not increase in the current situation,” said the analyst.

Published in The Express Tribune, October 7^th, 2022.

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