Treasury bill yields rise by up to 39 bps as govt raises Rs823 billion in auction

In the first treasury bill auction following the State Bank of Pakistan’s surprise decision to maintain the policy rate, the government raised Rs823 billion, with yields increasing by up to 39 basis points. 

The cut-off yields now approach the central bank's policy rate of 10.50%.

Before the January 26 monetary policy announcement, returns on T-bills had fallen to single digits, prompting hopes of an interest rate cut. However, the unchanged policy rate has led some bankers to note that foreign investors are still seeking higher-yield bonds despite the risks.

The increase in yields could attract more investment in T-bills, with foreign interest in domestic bonds showing some activity this fiscal year. However, geopolitical instability remains a significant obstacle to greater inflows, mirroring the decline in foreign direct investment.

The auction results showed the largest rise in yields for 12-month T-bills, which increased by 39 basis points to 10.39%. Six-month papers rose by 38 basis points to 10.32%, with the government raising Rs315 billion for this tenor. The three-month and one-month papers saw yields increase by 30 basis points each to 10.19%.

The total bids received amounted to Rs2.354 trillion, and Rs823 billion was raised, including Rs318 billion through the non-bidding procedure. The target for the auction was Rs650 billion, with a maturity amount of Rs697 billion.

Financial experts warned that the higher T-bill rates would increase the government’s debt burden, with interest payments in fiscal year 2026 expected to reach Rs8 trillion, the largest share of the current budget.