Pakistan borrows PKR 784 billion through T-bills’ auction

Pakistan's central bank raised PKR 784 billion through the auction of treasury bills or T-bills on Wednesday.

According to the State Bank of Pakistan (SBP), the borrowing was PKR 134 billion more than the targeted amount of PKR 650 billion.

The yields for all four tenors — one-month, three-month, six-month and 12-month — rose by 30 to 40 basis points (bps), signaling continued upward pressure on short-term borrowing costs.

The yields for one-month T-Bills climbed by 30 bps from 9.90% to 10.20%, three-month by 30 bps from 9.90% to 10.20%, six-month by 37 bps from 9.95% to 10.32% and 12-month by 40 bps from 10.00% to 10.40%.

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 308 billion was raised via the three-month tenor T-bills, followed by PKR 247 billion via the 12-month bill. The targets were PKR 150 billion and PKR 200 billion, respectively. The government raised PKR 122 billion and PKR 107 billion via the six-month and one-month T-bills, respectively.

Total participation in the auction reached PKR 2,355 billion, with competitive bids amounting to PKR 474 billion and non-competitive bids totaling PKR 309 billion.

Bids for PIBs rejected

In a separate development, the SBP rejected all bids for the 10-year Pakistan Investment Bonds (PIBs) during the auction held on the same day. The auction had a target of PKR 100 billion but failed to attract sufficient interest at acceptable rates. No auctions were held for the 2-year and 5-year PIBs.

Upcoming 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 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.