The State Bank of Pakistan (SBP) raised Rs913.14 billion through Market Treasury Bills (MTBs) in an auction conducted on Tuesday, falling short of the Rs1.2 trillion target and well below the Rs1.565 trillion maturity amount.
The auction saw cut-off yields remain unchanged from previous levels, standing at 11.9999% for 3-month bills, 11.9949% for 6-month bills, and 12.2977% for 12-month bills. Total bids received amounted to Rs1.69 trillion, with the SBP accepting bids worth Rs366.85 billion for 3-month tenors, Rs200.91 billion for 6-month tenors, and Rs258.75 billion for 12-month tenors. Additionally, the SBP secured Rs86.63 billion from non-competitive bidding, bringing the total to Rs913.14 billion.
The bid-to-cover ratio, a key indicator of auction demand, dropped significantly to 1.85 from 3.04 in the previous auction. This indicates a lower willingness among investors to purchase government securities at prevailing yields. The central bank accepted only 53.9% of the total bids it received in this auction.
In comparison, the previous auction held on December 11, 2024, saw the SBP sell Rs820 billion in MTBs against a higher target of Rs1.26 trillion. Yields in that auction were slightly higher for 6-month and 12-month bills, at 11.9999% and 12.2999%, respectively.
Treasury bills (T-bills) are short-term debt instruments issued by the government through the central bank to raise funds for immediate fiscal needs. These securities are considered one of the safest investments as they are backed by the government. Investors typically include banks, mutual funds, and institutional investors who use T-bills to park excess liquidity securely.
The declining bid-to-cover ratio in the recent auction signals tightening liquidity in the banking sector, possibly due to seasonal factors or increased borrowing costs. It also reflects cautious sentiment among investors, who may anticipate changes in monetary policy or shifts in macroeconomic conditions.
