Pakistan borrows PKR 753 billion through T-bills' auction

Pakistan's central bank raised PKR 753 billion through the auction of treasury bills or T-bills on Tuesday.

According to the State Bank of Pakistan (SBP), the borrowing was just PKR 3 billion more than the targeted amount of PKR 750 billion.

The yields showed mixed movements across tenors, with the one-month and six-month bills declining while three-month and 12-month bills rose.

The yields for one-month T-bills fell by 29 bps from 11.48% to 11.19%, six-month fell by 2 bps from 11.50% to 11.48%, while three-month rose by 29 bps from 11.50% to 11.79% and 12-month climbed by 25 bps from 11.50% to 11.75%.

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, PKR 473 billion, was raised via the three-month tenor T-bills against a target of PKR 200 billion. The government raised PKR 146 billion via the one-month bills, PKR 98 billion via the six-month bills, and PKR 36 billion via the 12-month bills.

Total participation in the auction reached PKR 2,968 billion in bids, with competitive bids of PKR 659 billion and non-competitive bids of PKR 94 billion. The government accepted PKR 753 billion in total.

Auction calendar

The SBP plans to raise PKR 3.35 trillion through seven auctions between February and 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 government-backed instruments. 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.