Government raises 10-year hybrid sukuk auction target fourfold to Rs200 billion

The government has increased the target size of its 10-year variable rental rate (VRR) Government of Pakistan hybrid sukuk auction to Rs200 billion from Rs50 billion, according to a notice issued by the Pakistan Stock Exchange (PSX) following advice from the Debt Management Office (DMO).

The revised target applies to the reopening of the 10-year VRR hybrid sukuk scheduled for June 10, 2026. PSX said the auction target mentioned in the term sheet and Annexure B had been amended, while all other auction terms and conditions remain unchanged. The exchange also updated the maximum per-investor limit for non-competitive bids in its auction system.

The sukuk was originally issued on April 16, 2026, and will mature on April 16, 2036. It is being reopened through PSX under a hybrid Shariah-compliant structure combining Ijarah sale-and-lease-back and Commodity Murabaha transactions. Under the structure, 55% of proceeds are allocated to the Ijarah component and 45% to Commodity Murabaha.

According to the term sheet, the floating return is benchmarked against either the six-month Treasury bill weighted average yield or the six-month Pakistan Revaluation Rate (PKRV). The benchmark for the first rental period has been set at 11.3685%, while the bid spread for the 10-year listed VRR sukuk is fixed at 35 basis points above the benchmark.

Profit payments will be made semi-annually, with the rental rate reset at the beginning of each six-month period.

Separately, PSX released a revised auction calendar for Government of Pakistan Hybrid Sukuk (GHS) and Government of Pakistan Ijarah Sukuk (GIS) issuances for the June-August 2026 period.

The calendar shows a cumulative target of Rs1.6 trillion for discounted and variable-rate GHS issuances across six auctions. Fixed-rate GHS and fixed-rate zero-coupon GIS auctions carry a combined target of Rs450 billion through three separate auctions.

Under the schedule, two VRR auctions will be held in June on June 10 and June 23, each carrying a target size of Rs350 billion. Two auctions are planned for July with targets of Rs250 billion each, while two further auctions in August will target Rs200 billion each.

Fixed-rate GHS and GIS auctions are scheduled for June 17, July 2 and August 4, with each auction carrying a target size of Rs150 billion.

Market participants said the larger reopening target reflects the government's growing reliance on longer-term Shariah-compliant domestic financing instruments as it seeks to diversify funding sources and expand the sovereign sukuk market.

The sukuk is listed and tradable on the Pakistan Stock Exchange and qualifies for 100% Statutory Liquidity Requirement (SLR) eligibility for qualifying investors. Investment is open to individuals, institutions, Roshan Digital Account holders, non-resident Pakistanis and foreign investors under the amended Government of Pakistan Sukuk Rules.