Pakistan T-bill yields surge up to 83 bps in first auction after interest rate hike

Pakistan’s treasury bill or T-bills yield rose sharply across all tenors in Wednesday's auction, the first since the State Bank of Pakistan hiked its policy rate by 100 basis points to 11.5% on April 27.

The government raised PKR 1.37 trillion through the T-bill auction, more than double the targeted PKR 650 billion, as markets repriced short-term debt under the new interest rate environment.

How much did T-bill yields rise after the SBP rate hike?

T-bill yields increased between 21 and 83 basis points across all tenors. The six-month tenor saw the steepest climb, rising 83 bps from 11.15% to 11.98%. The one-month yield rose 78 bps to 11.48%, the three-month rose 40 bps to 11.84%, and the 12-month rose 21 bps to 12.10%.

What were the full results of the April 29 T-bill auction?

The largest amount raised was PKR 699 billion via one-month T-bills, against a target of PKR 150 billion. The government also raised PKR 465 billion through three-month bills, PKR 172 billion through six-month bills, and PKR 38 billion through 12-month bills. Total bids submitted in the auction reached PKR 3,839 billion, of which PKR 1,374 billion was accepted.

Rising yields reflect higher borrowing costs for the government, as investors demand greater returns in response to tighter monetary conditions. This typically occurs when inflation concerns or fiscal pressures increase. Conversely, falling yields signal improved investor confidence and lower inflation expectations, allowing the government to borrow at cheaper rates.

Why did SBP raise the policy rate to 11.5%?

The SBP's Monetary Policy Committee raised the benchmark rate from 10.5% to 11.5% on April 27, with the hike taking effect on April 28. The committee cited escalating Middle East tensions, rising global oil prices, and heightened inflation risks as key drivers. The increase was intended to anchor inflation expectations and prevent second-round effects from the ongoing supply shock.

What is the T-bill auction calendar for this period?

The SBP plans to raise PKR 3.35 trillion through seven auctions between February and April. Maturing debt during this period totals PKR 3.84 trillion, of which PKR 1.02 trillion represents provincial government investments. The tenor-wise target breakdown is PKR 700 billion via one-month bills, PKR 850 billion via three-month bills, PKR 800 billion via six-month bills, and PKR 1 trillion via 12-month bills.

What are T-bills and PIBs?

T-bills are short-term government securities issued in one, three, six, and 12-month tenors, auctioned by the SBP every two weeks on Wednesdays. They are highly liquid instruments used by the government to raise short-term financing from local and foreign investors. Other government debt instruments include Pakistan Investment Bonds, National Savings instruments, Eurobonds, and International Sukuk.

Pakistan Investment Bonds, or PIBs, are longer-term debt securities issued in denominations of multiples of PKR 100,000, available in tenors of three, five, 10, and 20 years. Unlike T-bills, PIBs carry a fixed yield disbursed semi-annually. Both instruments are backed by the government and serve as key tools for domestic debt management.