SBP’s T-Bill auction sees strong participation as yields decline

The State Bank of Pakistan (SBP) has raised PKR 959 billion ($3.4 billion) through selling treasury bills and investment bonds on Tuesday surpassing targets amid huge participation.

The T-bill auction saw robust investor participation in its latest Treasury bill auction, with bids totaling PKR 3,235 billion. The government raised PKR 772 billion, surpassing its target of PKR 650 billion, while PKR 818 billion reached maturity.

Yields declined by 9 to 15 basis points across different maturities, with rates settling at 11.09% for one-month T-Bills, 11.14% for three-month securities, 11.18% for six-month bills, and 11.19% for 12-month instruments.

Additionally, the government raised PKR 187 billion through PIB floaters, amid PKR 700 billion in bids, falling short of its PKR 200 billion target. The previous T-Bill auction saw yields decline by up to 90 basis points.

Earlier this month, the central bank cut its key policy rate by 100 basis points to 11%, the seventh reduction from its peak of 22%. The easing cycle has been supported by falling food inflation, favorable global commodity trends, and the absence of anticipated gas tariff hikes.

The SBP’s semi-annual report noted that interest payments on domestic debt in the first half of FY25 were mainly tied to PIBs and T-Bills due to elevated interest rates. The government retired PKR 1,327 billion in net debt to scheduled banks—the first such move since FY19. Unlike that period, when SBP borrowings facilitated repayments, FY25’s lower fiscal deficit and substantial profit transfers from the central bank enabled the retirements.

To mitigate rollover risks and take advantage of lower rates, the government set higher auction targets for PFLs and fixed-rate PIBs while planning net retirements in T-Bills. The SBP said these measures have helped extend debt maturities, reduce rollover and currency risks, diversify the investor base, and lower overall borrowing costs.