Govt raises Rs498b via T-bills as yields rise

Gold falls Rs3,700/tola despite global surge to multi-month highs

KARACHI:

The State Bank of Pakistan (SBP) on Wednesday raised Rs498 billion in the Market Treasury Bills auction against the target of Rs500 billion, with cut-off yields rising across all tenors.

The central bank accepted Rs52 billion in one-month paper at a cut-off yield of 11.47%, up 12 basis points from the previous auction, while for three-month paper, Rs340 billion was accepted at 11.65%, a rise of 13 basis points. Six-month bills fetched Rs44 billion at 11.80%, higher by 10 basis points, and 12-month paper attracted Rs62 billion at 11.99%, up just four basis points. The total bids received in the auction amounted to approximately Rs2.1 trillion.

Meanwhile, the Pakistani rupee closed at 277.60 against the US dollar in the inter-bank market on Wednesday, gaining Rs0.01 from Tuesday's close at 277.61.

Gold prices in the local market declined even as international rates surged more than 3% to their highest level in over two and a half months, following a surprise liquidity support announcement by the US Treasury. According to rates shared by the All-Pakistan Gems and Jewellers Sarafa Association, the price of gold per tola fell by Rs3,700 to Rs458,236. Similarly, 10-gram gold was available at Rs392,863 after a drop of Rs3,172.

In contrast, global markets witnessed a sharp rally. Spot gold climbed 3.7% to $4,496.39 per ounce by 12:09 pm EDT, after earlier touching $4,498.69 – its highest since June 4. US gold futures rose 3% to $4,555.10, as per Reuters. On the technical front, spot gold broke above its 100-day moving average of around $4,381.

Market participants attributed the international surge to an unexpected announcement by the US Treasury. Interactive Commodities Director Adnan Agar explained the development. "Gold moved towards highs. It was at $4,495, almost going to touch $4,500. Wednesday's market low was $4,323. Suddenly, in the evening, an announcement came from the US, which caused a massive jump in prices – almost around $100 to $125."

The announcement was that the US Treasury, which could previously buy back US bonds up to $20 billion, has now doubled that limit to $40 billion. The US Treasury yields were very high earlier, which kept downward pressure on gold. But now those yields have cooled off, and due to this announcement, dollar printing will increase further – because they print dollars to buy back their Treasury bonds. As a result, the dollar's value has weakened, and gold's value has increased.

Now, looking at the coming days, gold has a level around $4,600. If that is crossed, then again it could head towards $4,800. In the local market, the price of silver declined by Rs186 to Rs6,800 per tola.