Pakistan's central bank raised PKR 1.49 trillion through the auction of treasury bills or T-bills on Wednesday.
According to the State Bank of Pakistan (SBP), the borrowing was PKR 137 billion more than the targeted amount of PKR 1.35 trillion.
The yields fell across three of the four tenors, with only the 12-month bill experiencing an increase.
The yields for one-month T-bills fell by 49 bps from 11.19% to 10.70%, three-month by 35 bps from 11.79% to 11.44%, six-month by 32 bps from 11.48% to 11.15%, while 12-month rose by 14 bps from 11.75% to 11.89%.
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 844 billion, was raised via the three-month tenor T-bills against a target of PKR 400 billion. The government raised PKR 404 billion via the one-month bills, PKR 225 billion via the 12-month bills, and just PKR 14 billion via the six-month bills.
Total participation in the auction reached PKR 4,250 billion in bids, with PKR 1,487 billion accepted.
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.
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