Pakistan's central bank raised PKR 582 billion through the auction of treasury bills or T-bills on Wednesday.
According to the State Bank of Pakistan (SBP), the borrowing was PKR 32 billion more than the targeted amount of PKR 550 billion.
The yields for all four tenors — one-month, three-month, six-month and 12-month — rose across the board, continuing the upward trend from recent auctions.
The yields for one-month T-Bills climbed by 35 bps from 10.15% to 10.50%, three-month by 21 bps from 10.29% to 10.50%, six-month by 30 bps from 10.44% to 10.74% and 12-month by 39 bps from 10.60% to 10.99%.
Rising yields indicate increased borrowing costs for the government, as investors demand higher returns to lend money. This typically occurs when there are concerns about inflation, fiscal deficits, or tighter monetary conditions. Conversely, when yields fall, it signals improved investor confidence and lower inflation expectations, allowing the government to borrow at cheaper rates.
The largest amount of PKR 260 billion was raised via the three-month tenor T-bills, followed by PKR 155 billion via the 12-month bill. The targets were PKR 200 billion and PKR 200 billion, respectively. The government raised PKR 95 billion and PKR 71 billion via the one-month and six-month T-bills, respectively.
Total participation in the auction reached PKR 915 billion in bids, with PKR 582 billion accepted.
Auction calendar
The SBP plans to raise PKR 3.35 trillion through seven auctions from February to April. During this period, maturing debt amounts to PKR 3.84 trillion, of which PKR 1.02 trillion represents provincial government investments.
The tenor-wise breakdown for the February-April period shows the government plans to raise PKR 700 billion via 1-month bills, PKR 850 billion via 3-month bills, PKR 800 billion via 6-month bills, and PKR 1 trillion via 12-month bills.
What are T-bills and PIBs?
The Pakistan government raises money from local and foreign investors through debt instruments. T-bills are one of those instruments backed by the government. Other such instruments are Pakistan Investment Bonds (PIBs), National Savings instruments, Eurobonds, International Sukuk, etc.
T-Bills are short-term, highly liquid government securities issued in 3, 6, and 12-month tenors. The State Bank of Pakistan auctions T-bills every fortnight (on Wednesdays).
PIBs are debt securities issued by the State Bank of Pakistan. These bonds are issued in denominations of multiples of PKR 100,000 and available in tenors of 3, 5, 10, and 20 years. The yield on these bonds is fixed and disbursed semi-annually.
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