State Bank of Pakistan raises PKR 409B in T-bill auction amid easing yields

The State Bank of Pakistan (SBP) raised PKR 409 billion through its fortnightly auction of treasury bills (T-Bills) on Wednesday, significantly surpassing the auction target of PKR 200 billion.

The market participation soared to PKR 1,058 billion, while PKR 361 billion worth of T-bills are scheduled to mature.

Yields on the short-term government papers fell sharply, with the 1-month T-bill cut-off yield dropping 39 basis points to 10.85%. The 3-month and 6-month tenors settled at 10.71%, down 29 and 19 basis points respectively, while the 12-month T-bill eased 10 basis points to 10.70%.

Separately, the federal government raised PKR 109 billion from its latest Ijarah Sukuk issuance against a target of PKR 250 billion.

The 1-year discounted Sukuk saw its rental rate fall 46 basis points to 9.99%. The 3-year and 5-year Ijarah Sukuk—Fixed Rental Rate (GIS FRR) dropped 63 and 45 basis points to 10.23% and 10.94%, respectively.

The Pakistan Economic Survey 2024-25 noted a persistent structural imbalance in the banking sector, as commercial banks continue to favor investment in risk-free sovereign instruments over extending credit to the private sector. This trend has been reinforced by elevated policy rates throughout most of FY24.

However, signs of monetary easing have begun to shift the lending landscape. Private sector credit disbursement jumped 13% year-on-year in June, according to a report by JS Global, reflecting improving risk appetite and a potential pivot in monetary policy stance.