Govt raises Rs1.437 trillion in MTBs, Rs116.4 billion in hybrid sukuk, Rs43 billion in PIBs auction

The government raised Rs1.437 trillion through the auction of market treasury bills (MTBs), Rs43 billion in Pakistan Investment Bonds (PIBs), and Rs116.4 billion in its first hybrid sukuk auction on Wednesday, with mixed yield movements indicating shifting interest rate expectations and strong demand for Shariah-compliant instruments.

In the treasury bills auction, the government raised Rs1.437 trillion in realised value, exceeding the target of Rs1.35 trillion and covering maturities of Rs1.38 trillion, with total participation recorded at Rs4.25 trillion.

Short-term yields declined, with the one-month T-bill cut-off falling by 49 basis points to 10.6982%, the three-month by 35bps to 11.438%, and the six-month by 32bps to 11.1549%. However, the 12-month yield increased by 14bps to 11.89%.

The divergence in yields indicates expectations that interest rates may have bottomed out, with signals of potential monetary tightening emerging in the medium term.

The government also raised Rs43 billion through the auction of 10-year floating-rate Pakistan Investment Bonds (PIBs) against a target of Rs50 billion, with participation of Rs910 billion.

Market participants said declining short-term yields reflect strong liquidity and demand, while the rise in longer-term yields signals investor caution over inflation and fiscal risks.

Hybrid sukuk auction draws strong investor demand

Separately, the government raised Rs116.4 billion in face value through its first auction of Government of Pakistan Hybrid Sukuk conducted via the Pakistan Stock Exchange auction system.

The auction received bids worth Rs290.29 billion in face value and Rs280.48 billion in realised value, indicating strong investor participation.

The issuance included two Shariah-compliant instruments, with the one-year fixed-rate discounted sukuk priced at a cut-off rate of 11.8%, up by 30.01 basis points, and the 10-year variable rental-rate sukuk set at 11.7185%, based on a reference rate of 11.3685% with a spread of 35bps.

The hybrid sukuk combines Murabaha and Ijarah structures in a single framework, marking a new structure in Pakistan’s sovereign debt market.

Officials said the issuance is part of efforts to expand Shariah-compliant financing and support the transition towards an Islamic financial system, with sovereign sukuk expected to play a key role in replacing interest-based government borrowing instruments.