In a Treasury Bills (T-bills) auction held on Wednesday, the government successfully raised over Rs900 billion, with cut-off yields falling by as much as 79 basis points.
This marked the first T-bills auction after the State Bank of Pakistan (SBP) reduced the benchmark interest rate by 50bps, bringing it down to 10.5% from 11%, after maintaining the rate unchanged since May 2025.
The government raised Rs493.3 billion through three-month T-bills at a cut-off yield of 10.48%. Additionally, Rs276.6 billion was mobilized through 12-month T-bills, with the cut-off yield decreasing to 10.48% from 11.27% in the previous auction. The lowest amount raised was Rs34 billion through six-month T-bills, which also carried a cut-off yield of 10.48%.
A significant feature of the auction was the large volume of non-competitive bids, through which the government raised Rs408 billion. Competitive bids accounted for Rs503 billion. Bankers considered the scale of non-competitive borrowing unconventional.
The total amount of bids amounted to Rs1.685 trillion, indicating excess liquidity in the banking system. Separately, the government also raised Rs105 billion through 10-year Pakistan Investment Bonds, bringing the total amount mobilized on Wednesday to Rs1.016 trillion.
Market experts had anticipated a decline in T-bill yields following the SBP’s rate cut, but the 12-month T-bill yield fell more sharply than expected, dropping by 79bps, which was greater than the reduction in the policy rate.
Bankers have indicated that the government’s borrowing needs may rise in the second half of the current fiscal year, as large profit payments by the SBP are expected to be absorbed.
