ISLAMABAD: Cut-off yields on Pakistan's Market Treasury Bills declined across all tenors at auction, with the 3-month, 6-month and 12-month tenors falling 45 basis points, 44 bps and 59 bps, respectively.
The market submitted bids totaling PKR 2,755 billion against a target of PKR 100 billion. The government accepted PKR 283 billion, resulting in a realized value of PKR 239 billion, according to auction results. The bid-cover ratio reached 9.73x.
The 12-month tenor drew the heaviest participation at PKR 2,110 billion, followed by the 3-month at PKR 568 billion and the 6-month at PKR 77 billion.
Analysts said investors anticipate a peak interest rate of 22% and foresee a subsequent decline. Aggressive participation in the 12-month T-bill auction reflected efforts to lock in higher yields ahead of a possible rate cut in March 2024, they said. Banks holding considerably higher liquidity positions are actively seeking safe investment opportunities, driving the strong turnout.
Historically, T-bill cut-offs have maintained an average spread of 52-58 bps above the policy rate over a five-year span. However, since the November 2023 auction, that trend has deviated, with negative spreads observed.
Cut-off rates in the latest auction are 100-116 bps below the prevailing policy rate of 22.00%, highlighting the shift.
