Benchmark interest rises to 5.69 percent

KARACHI: The State Bank of Pakistan (SBP) Wednesday sold the benchmark six-month treasury bill (T-Bills) at a higher yield to control the rising inflation in the country.

The bank auctioned the T-bills worth Rs 21.95 billion at a cutoff yield of 5.69 percent, up from the last auction yield of 5.21 percent. The market experts said the auction was in line with the market forecast of 5.60 percent-5.70 percent.

The central bank’s statement said the primary dealers offered total bids worth Rs 30.957 billion, compared with the pre-auction target of Rs 10 billion, the central bank said. The market experts said the rising yield is the clear indication that the central bank is trying to control the inflation. “The rise in yield was not all surprising. It was very much expected,” said a dealer at a local bank. “It showed the central bank is serious about taming inflation, which may become a problem,” he added.

Last week, the central bank revised upward its inflation projection to between 8.2 percent and 8.5 percent in the current fiscal year that ends June 30. It had earlier forecast a range of 7.6 percent -8.2 percent. In the first eight months of this fiscal year, consumer prices rose an average 8.91 percent on year. In the year-earlier period, prices had risen 3.49 percent on year. Dealers said the overnight rate is likely to remain largely stable after the settlement of the latest auction Thursday, as an inflow of more than Rs 9.5 billion from previous maturing securities is due Thursday.

“I am not expecting a major rise in the rate,” another dealer said, adding banks have already covered their positions to meet the central bank’s weekly cash reserve requirement of 5 percent. The rate stayed unchanged at 1 percent Wednesday. staff report

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