Government Raises Rs660 Billion in Treasury Bills Auction as Yields Stay Above the Policy Rate

The government raised Rs660.06 billion in Wednesday’s treasury bills auction, against bids worth Rs2.52 trillion — close to four times the amount it took. The State Bank’s results covered one-month, three-month, six-month and 12-month bills, with settlement set for October 15.

The three-month paper did most of the work, bringing in Rs301.86 billion. Six-month bills raised Rs227.84 billion and one-month bills Rs112.98 billion, while the 12-month tenor attracted just Rs17.37 billion. The pattern is hard to miss: investors are happy to park money with the government, but they would rather keep it short than lock it in for a year.

What did the yields settle at?
The cut-off yield came in at 11.5003 percent for one-month bills, 11.9999 percent for three months, 12.3989 percent for six months and 12.4999 percent for 12 months. The six-month rate, the one bankers watch most closely, slipped six basis points from 12.45 percent at the October 1 auction — but at 12.39 percent it still sits 89 basis points above the policy rate. Non-competitive bids added Rs259.70 billion, including Rs194.67 billion from provincial governments, all of it placed in the three-month tenor.

Bankers read the auction as two stories running side by side. The government’s reliance on bank money keeps growing, and the domestic debt pile grows with it. Meanwhile, what private-sector borrowing there is goes largely towards working capital — keeping businesses running day to day — rather than into new long-term investment. When government paper pays comfortably more than the policy rate, banks have little reason to look much further for returns.