KARACHI: The results of the auction of treasury bills on Wednesday reflected the government preference to lean on the central bank more for borrowing needs instead of scheduled banks.

The government raised Rs173 billion through auction of T-bills which was less than the target of Rs200bn set for the auction.

The government has been relying heavily on banking money to meet liquidity requirements. The practice continues but not with zest as the emphasis has shifted to borrowing from the State Bank of Pakistan.

The government can probably borrow more liberally from the central bank now after completion of agreement with the International Monetary Fund (IMF). The IMF used to be critical of borrowing from the central bank.

The government has actually been retiring the banking debts. Since the maturity of Pakistan Investment Bonds (PIBs) was about Rs1.2 trillion during June and July, the repayments required more borrowing.

However, the banks have shown no change in their investment strategy and despite sharp fall in the returns of both T-bills and PIBs, they show willingness to park maximum liquidity in the government papers.

In this auction, the banks offered Rs309bn to invest. The highest amount of Rs79.7bn was raised for benchmark six-month T-bills at a cut-off yield of 5.9 per cent, followed by Rs61bn for three-month tenor at a cut-off yield of 5.85pc and Rs32.6bn for 12-month papers at a cut-off yield of 5.91pc.

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