Govt borrows more with slight cut in T-bill rates

In the first auction of the treasury bills (T-bills) after the State Bank of Pakistan (SBP) cut its policy rate in nearly four years early this month, the government on Wednesday exceeded its auction target by 72 per cent at slightly reduced cut-off yields. The SBP brought down its policy rate by a meagre 150 basis points to 20.5pc on June 10 after keeping it at an unprecedented level of 22pc for almost a year. The market was expecting a bigger cut as the inflation decelerated to 11.8pc in May. However, the government kept the cut-off yield on 3-month T-bills unchanged at 20.14pc while reducing the rate by just one basis point to 19.96pc for six-month papers and 41bps to 18.54pc for 12-month papers. However, the bid pattern showed that the banks were eagerly willing to park maximum liquidity in long-term papers as they anticipate further easing the interest in the coming months.