Banks shift to invest in T-bills

Banks shift to invest in T-bills

In the auction yesterday, SBP was able to sell treasury bills worth Rs70.543 billion while the target was set for Rs70 billion which means the SBP succeeded in attracting banks’ investment. The Banks, however, were still investing for short-term paper of three-month tenure. They bought three-month t-bills for Rs66.337 billion while the rest was invested for six months. No bid was offered for 12 months. Banks are investing in lower maturity instruments so that they can reinvest in case of further policy rate hike by the Central Bank. The shift in banks investment to T-bills which are offering attractive cut-off yield of 13.85% p/a (3 months) will help the government to meet its budgetary requirement from the banking system rather than the inflationary borrowing which it makes from the Central Bank. However shift in banking strategy to invest in government securities or other security papers will result in lower private sector credit flow.