KARACHI: In light of yet another potential interest rate decrease, the government on Wednesday slashed the returns on Treasury bills by as much as 49 basis points and raised them much below the startling volume of bids.
Against a target of Rs250 billion, the government raised Rs424.15 billion through the T-bill auction. As the bids reached Rs1.7 trillion, investors appeared keen to store their excess cash in the risk-free government notes.
The trend indicated that banks placed bids of Rs1.2 trillion and were prepared to invest the largest amount over the longest 12-month period. At 11.80%, the government only raised Rs171.4 billion for the tenor, a 49bps down from the last auction rate of 12.29 percent.
The cut-off yields for the benchmark six-month and short-term three-month tenors showed a decline of 21 basis points. For each tenor, the government raised Rs83.8 billion and Rs75 billion at an 11.78 percent rate.
In addition, the government raised Rs104 billion as a non-bidding sum, bringing the total amount borrowed to Rs434.15 billion.
There was a competition to purchase as many bonds as possible during the Pakistan Investment Bonds (PIBs) auction, but the government stayed calm and only borrowed Rs8 billion out of the Rs775.2 billion total bids. A further Rs3.86 billion was raised without a bid, bringing the total to Rs11.86 billion.
Government-issued debt instruments, such as Treasury Bills and PIBs, are used to raise money for fiscal purposes. For investors looking for steady, long-term returns, PIBs are appropriate because they are long-term securities with maturities ranging from three to twenty years and fixed interest rates. In contrast, T-Bills are short-term securities that have maturities of three, six, or twelve months. They are issued at a discount to face value and are redeemed at par, making them a quick and somewhat safe way to invest.
