Pakistan's central bank raised PKR 997 billion through the auction of treasury bills or T-bills on Wednesday.
According to the State Bank of Pakistan (SBP), the borrowing was PKR 547 billion more than the targeted amount of PKR 450 billion.
The yields showed mixed movements across tenors, with longer-dated bills experiencing increases while the shortest tenor declined.
The yields for one-month T-Bills fell by 5 bps from 10.20% to 10.15%, while three-month rose by 9 bps from 10.20% to 10.29%, six-month by 12 bps from 10.32% to 10.44% and 12-month by 20 bps from 10.40% to 10.60%.
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 483.2 billion was raised via the three-month tenor T-bills, followed by PKR 289.9 billion via the 12-month bill. The government raised PKR 148.9 billion and PKR 75.0 billion via the one-month and six-month T-bills, respectively.
Total participation in the auction reached competitive bids of PKR 319.8 billion and non-competitive bids of PKR 677.2 billion.
Auction calendar
The SBP has released its auction target calendar for T-bill auctions from February to April, planning to raise PKR 3.35 trillion through seven auctions. 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 SBP 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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