In order to give banks liquidity on Friday, the State Bank of Pakistan (SBP) injected Rs1.8 trillion into the market. On February 24, the State Bank carried out Open Market Operations (OMOs) and Reversed Repo Purchases (Injection) and received 44 bids totaling Rs1.953 trillion.
The SBP accepted 41 bids totaling 1.8 trillion at 17.25 percent for seven days out of the total bids received.
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The SBP also carried out a Shariah-compliant Mudarabah-based OMO, Injection, on February 24, 2023, and accepted bids worth Rs 20 billion at a 17.25 percent rate.
Analysts predicted that an OMO maturity of Rs 2 trillion would be due on February 24, 2023; as a result, SBP conducted an OMO (injection) of a shorter tenor.
It is important to note that the cut-off yields for this OMO were 17.25 percent, compared to 19.95 percent in the most recent T-Bill auction. The majority of participants in the financial markets are currently anticipating a meeting and anticipate an increase in the next policy rate of about 2% as a result of this “abnormal” spread.
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According to Arif Habib Limited, the cut-off yields of the 3M, 6M, and 12M tenor Market Treasury Bills (T-Bill) increased by 195bps to 19.95 percent, 206bps to 19.90 percent, and 184bps to 19.79 percent, respectively, compared to the previous auction.
In all three tenors, yields are at historic highs based on data available since June 1998. The increase in Treasury yields suggests that the market is beginning to weigh economic concerns as investors continue to pay attention to rising inflation both globally and in Pakistan, according to analysts at AHL.
In light of increased inflationary pressures brought on by an increase in domestic food prices, additional tax measures, tariff increases, and a weaker currency, the spread between the policy rate and T-bill rates is continuing to widen, and the market is anticipating interest rate increases.
