Banks show tepid interest in T-bills


Banks show tepid interest in T-bills KARACHI: Banks showed little interest in bidding for treasury bills on Monday despite being largely dependent on government papers for their risk-free profits.

The government sold treasury bills of Rs62 billion against a target of Rs250bn in the latest auction.

Monday’s auction was the first one of the October-December quarter for which the government has set a target of Rs1,225bn. Banks offered Rs130bn, which was roughly half of the target for the first auction.

Some bankers said a low net profit margin has curtailed banks’ earnings, which could have been the reason for their lack of interest in Monday’s auction.

The government has already amas­sed Rs1.44 trillion by floating debt, mostly treasury bills, during the first two months of the current fiscal year.

But the large maturity of Pakistan Investment Bonds (PIBs) in July-August reduced the overall banking debt of the government. From June to August, PIB maturities amounted to Rs989bn.

PIBs are still attractive for banks, although their returns have come down substantially in the wake of subdued inflation and low policy rate. The State Bank of Pakistan (SBP) kept the policy rate unchanged at 5.75 per cent in its last monetary policy announcement.

The government has been borrowing heavily from the SBP to meet its budgetary requirements. It crossed Rs750bn in the first two and a half months of the current fiscal year.

The government raised Rs10bn, Rs22bn and Rs29n through three-, six- and 12-month treasury bills, respectively. Bankers said the cut-off yields were not attractive because they were close to the policy rate.

More worrisome is the fact that, unlike the preceding year, banks have so far failed to attract the private sector. The private sector emerged as the main player in 2015-16, as it borrowed Rs460bn.

But the momentum ended in the first quarter of the current fiscal year, as the private sector is still retiring its debt so far.


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