Govt turns down Rs302bn in long-term financing despite heavy demand at debt auctions

The federal government on Tuesday declined to tap Rs302.5 billion in available long-term financing, rejecting all bids submitted in an auction of 10-Year Floating Rate Pakistan Investment Bonds (PFL) even as investors showed strong appetite for government debt.

The decision came on a day when the government successfully raised Rs1.243 trillion through Market Treasury Bills (MTBs), underscoring a preference for short-duration borrowing despite substantial demand for longer-dated securities.

Combined investor participation across the two auctions exceeded Rs3.39 trillion, according to auction results released by the State Bank of Pakistan (SBP).

Demand remained concentrated in treasury bills, particularly the 12-month tenor, which attracted bids worth nearly Rs1.75 trillion. The government accepted more than Rs600bn in this maturity alone, making it the single largest source of funding in the auction.

Shorter tenors also saw sizeable participation, helping push total accepted bids in the MTB auction above Rs1.24tr. Competitive bids accounted for roughly Rs1.06tr of the amount raised, while non-competitive participation contributed a further Rs182.16bn.

Provincial governments were also active in the auction, placing Rs100bn exclusively in the three-month paper.

In contrast, the outcome was markedly different for the 10-year floating-rate bond auction. Despite receiving bids worth Rs302.5bn from primary dealers, the government chose not to accept any offers, resulting in zero mobilisation from the instrument.

The rejection means all funds raised during the session came from securities with maturities of one year or less, further concentrating the government's funding mix in short-term debt.

The latest auction results suggest investors remain willing to commit substantial capital across both short- and long-term government instruments. However, Tuesday's allocations indicate the government's borrowing requirements were met entirely through treasury bills, leaving longer-tenor financing on the table.