Govt keeps treasury bill returns higher over policy rate

Dawn reported that the government held treasury bill yields nearly flat at a Wednesday auction, with every tenor still paying more than the 11.5 per cent policy rate set by the State Bank. It was the final T-bill sale ahead of the next monetary policy announcement on Oct 26. The government raised Rs417.6 billion through competitive bids and another Rs267.9bn through non-competitive bids, a total of Rs685.5bn.

Investors, mostly banks, were keen to place their surplus funds in government paper because domestic lending options look very narrow. Bids reached Rs2.6 trillion, slightly below the Rs2.7tr recorded at the Oct 1 auction. Experts linked the cautious mood to the Gulf war and political uncertainty in the country.

The six-month bill, the benchmark tenor, edged down 6 basis points to 12.39 per cent from 12.45 per cent. That remained 89 basis points above the policy rate, after a 75 basis point jump at the earlier auction. The government relies heavily on bank funds, and borrowing has risen each year.