T-bill yields jump over 400bps signalling another jumbo rate hike today

• Yields across three tenures up between 423bps and 434bps
• Three-month bill yield rises to 28.85%, up by 423bps from last week
• Benchmark one-year bill up by 427bps to 28.11%
• Last time yields rose with such intensity was on April 11, after 700bps rate hike

In line with the expectations, the Treasury bill yields jumped the most since April, signalling another bumper rate hike announcement today, as the Central Bank allowed the bill and bond yields to go up since last week amid the worsening economic crisis. 

At the bill auction held yesterday, the yields rose across the three tenures by between 423 basis points and 434 basis points, bringing the yields at a striking distance from the 30.0 percent level.  The most popular three-month bills fetched 28.85 percent, adding as much as 423 basis points from the level seen last week, bringing the total gain in the lowest tenure bill in the two weeks to a mammoth 735 basis points.  The six-month bill added 434 basis points to 28.74 percent, bringing the two weeks’ increase to 684 basis points. 

Meanwhile, the benchmark one-year bill rose by 427 basis points to 28.11 percent, bringing the incremental increase in the two weeks to 607 basis points. 

The last time the yields rose with such intensity was on April 11, when the government securities yields went through a long overdue correction after the Central Bank delivered a jumbo-sized 700-basis-point rate hike in the earlier week to rein in the runaway prices and also to put a damper on the rising imports to stabilise the currency. 
First Capital Research, an independent research house, this week bet on a rate hike at today’s Monetary Policy announcement by between 100 basis points and 300 basis points, due to the heightened uncertainty and to meet the rising return expectations by investors, who have been battered by hyperinflation, which surpassed 50 percent last week and the impact coming from higher taxes, reimplemented from June onwards. 

The auction held yesterday also saw the full acceptance of the Rs.70.0 billion in bills offered after suppressing the bids received in the last two weeks. 

The auction remains open till 3:30 p.m. today to accept any further bids up to 25 percent of the aggregate amount offered at the auction, received under the aforementioned weighted average yields.