T-bill yields jump beyond policy rate

According to Dawn, Treasury bill cut-off yields rose by as much as 75 basis points at Wednesday's auction, pushing returns well above the 11.5 per cent policy rate set by the State Bank of Pakistan. Profit rates went up across every tenor, and the wide spread over the policy rate has surprised market participants and stirred speculation about a possible rate hike at the October 26 Monetary Policy Committee meeting.

The six-month bill, the benchmark tenor, posted the largest rise of 75 basis points, with its yield climbing to 12.45 per cent from 11.70 per cent at the September 16 auction, and the government collected Rs88.3 billion through it. Three-month bills gained 61 basis points to 11.99 per cent, raising Rs143.86 billion, while the 12-month rate, with the smallest gain at 45 basis points, reached 12.49 per cent and brought in Rs29.66 billion.

Dawn also pointed to price pressures, with inflation at 11.1 per cent in August and projected near 10.75 per cent for September, while oil has hit up to $100 per barrel as the Gulf war continues. Experts quoted in the report said Pakistan imports about 70 per cent of its fuel needs, which could add to inflationary pressure. Bids totalled Rs2.726 trillion in the auction, and the government raised Rs880 billion, comprising Rs400.25 billion from competitive bids and Rs479.8 billion from non-competitive ones.