T-bill yields rise to 26-year high

Rupee resumes winning streak after one-day halt

KARACHI:

Commercial banks have jacked up interest rate aggressively by almost two percentage points to a 26-year high close to 20% on financing to the cash-strapped government, signalling that the central bank is all set to increase key policy rate soon.

The high interest rate compelled the government to raise only Rs258 billion through the sale of its debt securities namely T-bills against the target of Rs300 billion.

Had the government opted to raise the targeted amount, it would have led to a further increase in interest rate.

Topline Securities CEO Mohammad Sohail said in a short commentary that an approximately two-percentage-point hike in cut-off yield in the latest T-bill auction “signalled an increase in (the central bank’s key) policy rate”.

The International Monetary Fund (IMF) has recently recommended the central bank to increase the policy rate by two to three percentage points to win back its $6.5 billion loan programme. At present, the policy rate stands at 17%.

Data breakdown showed that the cut-off yield on three-month T-bills rose by 195 basis points to 19.95% in Wednesday’s auction compared to the previous auction.

The yield rose by 206 basis points to 19.90% for six-month T-bills while it increased by 184 basis points to 19.79% for 12-month bills.

Meanwhile, statements from high-ups that the IMF and China were about to bail Pakistan out of crisis helped the rupee to resume its recovery drive after a one-day gap, as it gained 0.23%, or Rs0.61, to Rs261.90 against the US dollar in the inter-bank market.

Published in The Express Tribune, February 22^nd, 2023.

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