Friday, October 12, 2018

Govt borrows over Rs2.6trn to meet financial needs - Business RECORDER

Govt borrows over Rs2.6trn to meet financial needs - Business RECORDER 


KARACHI: The federal government raised some Rs 2.6 trillion through the auction for short-term government papers to fulfill its financial needs. 

Following the increase in the key policy rate, margins on Market Treasury Bills (MTBs) also rose to 1.05 percent in the auction held on Thursday. 

Banks and financial institutions were already expecting some increase in the key policy rate, of which thin participation was witnessed in the previous auction held on Sep 26, 2018, just three days before the monetary policy announcement. As against the target of Rs 350 billion, bids worth Rs 1.2 billion were received in the last auction and the federal government borrowed less than one billion (Rs 736 million). 

As the policy rate increased as per expectation, banks and financial institutions aggressively participated in the auction held on Thursday and submitted bids over Rs 2.7 trillion. 

The State Bank of Pakistan (SBP), on October 11, 2018, conducted the auction for the sale of 3-, 6- and 12-month MTBs and received bids amounting to Rs 2.79 trillion with a realized value of Rs 2.735 trillion. 

Some Rs 2.785 trillion worth bids were received for 3-month and Rs 6.1 billion for 6-month varieties. However, no bid was received for 12-month bills as banks are anticipating further increase in key policy rate in coming months and avoiding investing in one year bonds. 

The margin on all MTBs increased in the auction as the SBP, in the recent monetary policy, had increased interest rate by 100 bps for next two months. 

Out of the received bids, the federal government accepted bids amounting to Rs 2.659 trillion with a realized amount of Rs 2.606 billion against the tentative target of Rs 3 trillion for this auction. 

Some Rs 2.6 trillion bids were accepted for three months MTBs at a cut-off yield of 8.8 percent, up 105 bps. 

Similarly, the cut-off yield on 6-month bonds surged by 100 bps to 6.6492 percent with Rs 478 million accepted bids. 




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