Yield on six-month T-bills rises

Yields on six-month market treasury bills rise to 13.14 per cent in an auction held by SBP.

KARACHI: Yields on six-month market treasury bills rose to 13.14 per cent in an auction held by the State Bank of Pakistan (SBP) on Wednesday.

In the previous auction conducted a fortnight ago, yields on the paper stood at 12.84 per cent.

This is the first auction of treasury bills after the central bank made a fresh increase of 50 basis points to 13.5 per cent in the benchmark policy rate in the monetary policy announced on September 29.

In the auction, yields on 12-month treasury bills also increased to 13.23 per cent compared to 12.78 per cent a month ago. In the last auction held on September 22, the central bank had rejected all bids for the 12-month paper.

For short-term three-month bills, the central bank offered a return of 12.83 per cent, which was also higher compared to 12.74 per cent in the previous auction.

The central bank sold treasury bills worth Rs80.14 billion, meeting the target of Rs80 billion set for the auction. It had received offers of Rs233.65 billion.

The break-up shows that banks and financial institutions went for heavy investment in short-term three-month bills, injecting Rs55.31 billion.

In six-month bills, they invested Rs19.08 billion and in the 12-month paper they placed Rs5.74 billion.

In the monetary policy, the central bank jacked up the interest rate in a bid to contain inflationary pressures and restrict heavy government borrowing from domestic sources.

It also cautioned that it would resort to a further tightening of the policy in coming months. Analysts are also expecting more increases in the policy rate before the end of the current fiscal year in June 2011.

Published in The Express Tribune, October 7^th, 2010.