Commercial banks offer financing of Rs 2.013 trillion

CARACHI:

Commercial banks offered cash-strapped government funding of Rs 2.013 trillion after two months of holding prices at an all-time high. The move comes after a slight drop in inflation was seen and the finance minister expressed his taste for a low benchmark interest rate in Pakistan.

The government borrows from commercial banks by selling sovereign debt securities, including treasury bills.

Threshold yields (bank to government funding prices) on three- to 12-month Treasury bills were cut by around 24-26 basis points to 15.73-15.75% at the latest auction of bonds. The drop in the rate prompted the government to borrow a higher amount at Rs877 billion against a target of Rs650 billion.

Talk to Express Grandstand, Topline Securities CEO Muhammad Sohail said: “After a two-month hiatus, treasury bill auctions saw lower cut-off yields at today’s (Wednesday) auction.”

“CPI (monthly inflation reading) figures that were lower than expected in September and expectations of no change in the central bank’s key rate forced investors to hoard treasury bills at lower yields than expected. from the last auction,” he added.

A senior analyst added that in anticipation of the central bank’s announcement not to change the benchmark policy rate on Monday (October 10th), commercial banks were encouraged to lower their prices.

Earlier, Finance Minister Ishaq Dar expressed an indication to ease the key rate which currently stands at 15%. “Dar’s comments sent signals to the market that even if the rate isn’t cut, it won’t go up in the current situation,” the analyst said.

Published in The Express Tribune, October 7e2022.

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