SBP plans to borrow PKR 6.3 trillion from Sept to Nov

The State Bank of Pakistan (SBP) plans to auction Pakistan Investment Bonds (PIBs), Fixed PIBs Floating Rate, and Market Treasury Bills (MTBs) from September to November to borrow a total of PKR 6.295 trillion.

According to the auction calendar uploaded on the central bank's website, the SBP will hold seven MTB auctions, three PIBs (fixed rate), and seven PIBs (floating rate) during the quarter. The breakdown reveals that the government intends to borrow PKR 3.475 trillion through MTBs and the remaining PKR 2.820 trillion through PIBs (fixed and floating).

In the last two T-bill auctions held on August 21 and September 4, the cut-off yields declined by up to 149 basis points (bps) in total. The cut-off yields for the three, six and 12 month-tenures stand at 17.48%, 17.74% and 17%, respectively.

This is because the market expects the SBP to slash the interest rate, which is currently 19.5%, by around 150bps in its meeting on September 12.

Market yields have reacted to inflation expectations, with benchmark treasury yields falling between 124 to 200bps in August. PIBs hit a new low of 13.4% in August, signaling a rate cut in September. This is the lowest yield level since 2022.