Rate cut hopes rise as T-bill yields fall

The State Bank of Pakistan (SBP) on Wednesday slashed treasury bill (T-bill) yields by up to 39 basis points, signalling possible room for a policy rate cut in the upcoming monetary policy meeting scheduled for July 30. Despite maintaining the benchmark interest rate at 11pc since May, the central bank’s latest T-bill auction reflects a shift in market sentiment, with expectations rising for monetary easing amid falling inflation and modest economic growth. The cut-off yield for 1-month T-bills dropped by 39bps to 10.85pc from 11.24pc. Yields for 3-, 6-, and 12-month papers were also lowered — by 29bps to 10.99pc, 19bps to 10.89pc, and 10bps to 10.80pc, respectively. The moderation in inflation has further fuelled speculation of an interest rate cut. Headline inflation stood at 3.2pc in June and is expected to range between 3pc and 3.5pc year-on-year in July — down significantly from 11.1pc in July 2024.