Pakistan keeps treasury bill yields above 11.5% po...

Summary

• Pakistan’s government continues to offer investors returns above the central bank’s policy rate as banks and other investors favour government securities over lending to businesses amid economic uncertainty, sluggish domestic investment and escalating regional tensions.
• Returns on all T-bill tenors remained above the State Bank of Pakistan’s policy rate of 11.5 per cent, despite rates remaining largely unchanged.
• As the State Bank prepares for its October 26 policy announcement, the challenge for policymakers will be to maintain financial stability while encouraging banks and businesses to channel more funds into productive economic activity.

AI Generated Summary

Pakistan’s government continues to offer investors returns above the central bank’s policy rate as banks and other investors favour government securities over lending to businesses amid economic uncertainty, sluggish domestic investment and escalating regional tensions.

In an auction held on Wednesday, the government raised Rs685.5 billion through treasury bills (T-bills), including Rs417.6 billion in competitive bids and Rs267.9 billion through non-competitive bids, according to the auction results.

Returns on all T-bill tenors remained above the State Bank of Pakistan’s policy rate of 11.5 per cent, despite rates remaining largely unchanged. The auction was the last before the central bank announces its next monetary policy decision on October 26.

Financial experts said investors were reluctant to take risks because of the Gulf conflict and political uncertainty at home. Government securities remain an attractive option for banks seeking returns while opportunities for domestic lending appear limited.