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Pakistan Economy

Pakistan Economy - January 11, 2024

T-Bills worth PKR 283bn sold, 12M paper yields down by 59bps



T- Bill Auction: Yields decrease by 44-59bps


In yesterday’s Market Treasury Bills (T-Bill) Auction, the cut-off yields of 3M, 6M, and 12M tenors came down by 45bps, 44bps, and 59bps, respectively. The market had offered PKR 2,755bn against the target of PKR 100bn, out of which Gov’t accepted PKR 283bn culminating in a realized value of PKR 239bn. As a result, the bid-cover ratio clocked in at 9.73x. The highest concentration of participation was seen in the 12M with PKR 2,110bn followed by 3M and 6M with PKR 568bn and PKR 77bn, respectively.

Analyst Comment

§ Investors anticipate a peak interest rate of 22% and foresee a subsequent decline.

§ We witnessed aggressive investor participation in the 12M T-bill auction to secure higher yields in anticipation of a rate cut in Mar’24.

§ Banks with considerably higher liquidity positions are actively seeking safe investment opportunities, resulting in significant participation.

§ To note, historically, T-bill cut-offs have typically maintained an average spread of 52-58bps higher than the Policy rate, considering a historical average spanning 05 years.

§ However, since Nov’23 T-bill auction marks a deviation from historical trends, as negative spreads were observed.

§ Cut-off rates in the recent auction are 100-116 bps lower than the prevailing policy rate of 22.00%, highlighting a shift.

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Attachments

  • T.Bill Auction 11-Jan-2024.pdf
    236.1 KB · Views: 0

Economy: MPS: Policy Rate to remain unchanged at 22% - By Spectrum Research​

We expect SBP to keep the Policy Rate unchanged at 22%. One of the key drivers influencing the decision is high inflation. Inflation surged by 29.7%YoY in Dec’23, largely due to an increase in electricity and food prices. The increase in inflation during Dec’23 has faded the chances of early cut in policy rate i.e in Jan’24, we expect once the inflation eases the SBP would consider the easing monetary policy most probably Mar’24 onward.

We expect, the inflation has been moderating due to a high base effect, as the CPI for Jun’24 expected to be around 18%-19%YoY. However, at the current stage the inflation remained at higher levels and we believe SBP doesn’t want to carry the negative real interest rates.

Going forward, the strong foreign inflows post IMF agreement along with current FDI agreements with foreign companies expected to keep PKR stable against the USD. Moreover, the government already bearing the high cost of borrowing, the easing policy rate will reduce the borrowing cost while easing bond’s yield in the interbank market could also mold the SBP towards easing in 3QFY24.

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Attachments

  • 982c6cb1-0b12-42fb-91f5-bef6b3653133_compressed.pdf
    102.7 KB · Views: 0
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