SBP Plans Auction to Buyback Market Treasury Bills

The State Bank of Pakistan (SBP) announced its plan to conduct an auction for the buyback of securities for carrying out the management of public debts and fiscal position. The government will be able to lessen its debt load, pay less in interest, and improve its debt profile, according to analysts, thanks to the modification made to the current buyback program. Instead of raising money, the government will now be able to buy back bonds and bills from the market. Liquidity will be created in the debt markets by further exchanging run-down and dead instruments for run-up and liquid ones. SBP will conduct auctions for the buyback of MTBs on behalf of the Government of Pakistan as per the Market Treasury Bills (MTBs) Rules 1998 provide for the buyback of MTBs by the Government of Pakistan. In this regard, SBP is pleased to prescribe the following procedure for the execution of such buyback transactions: According to a circular, the SBP will announce the details such as security, target amount, auction schedule, etc., and auction results for the buyback of MTBs on Refinitiv, Bloomberg, and SBPK pages, and on the SBP website. The buyback price of the security will be determined through the multiple-price competitive auction process. All Primary Dealers will be eligible to submit competitive bids in the auctions. Non-competitive bids can also be submitted as per existing instructions. Eligible participants will submit the following details in the auction bidding on the Bloomberg Auction Module (AUPD) within the stipulated time: Apart from the above, all other auction rules and procedures shall apply to the buyback auctions as defined in various auction-related circulars. If government borrowing needs are met through external sources, they can buy back debt securities from the market or switch between securities to manage debt duration. The previous buyback program was launched in October 2021. According to the SBP, the share of MTBs in outstanding Federal Government securities stood at 27.7 percent by the end of June 2024 whereas the share of PIBs in outstanding Federal Government securities stood at 57.8 percent at by the end of June this year. Around 85.8 percent of the total MTBs and PIBs are classified as Available for Sale, 4.3 percent are classified as Held for Trading, while only 9.8 percent are classified as Held to Maturity at the end of June 2024.