Pakistan’s government raised Rs1.913 trillion through a treasury bill auction on Wednesday, exceeding its target of Rs1.65 trillion. Banks submitted bids worth approximately Rs4.87 trillion, showing strong demand for government securities.
The auction also reflected the impact of the State Bank of Pakistan’s recent policy rate increase, as cut-off yields rose across all investment tenors.
Government Borrowing Exceeds Auction Target
The government secured Rs1.913 trillion against its planned target of Rs1.65 trillion. However, Rs1.195 trillion in treasury bills matured during the period. The total amount included Rs244.4 billion raised through non-competitive bids. These bids allowed eligible participants to purchase securities under the auction’s applicable terms.
Banks Show Strong Demand for Treasury Bills
Banks submitted bids worth Rs4.867 trillion, highlighting their interest in government-backed securities. The strong demand also raised questions about lending to private businesses.
Financial institutions appeared keen to place available funds in government papers offering relatively predictable returns. Consequently, businesses could face challenges in accessing credit if banks continue prioritising these investments over private-sector lending.
Treasury Bill Yields Rise Across All Tenors
The government increased cut-off yields by up to 61 basis points across different maturities. Three-month treasury bills attracted the largest amount, with the government raising Rs783.5 billion at a yield of 12.42 per cent. One-month bills generated Rs473 billion at 12.1 per cent.
Meanwhile, six-month bills raised Rs169.5 billion at 12.65 per cent. The government also secured Rs242.7 billion through 12-month bills at a yield of 12.89 per cent.
What the Auction Means for the Economy
The auction highlights the government’s continued reliance on domestic borrowing to meet its financing needs. Higher yields can also make government securities more attractive to banks and other investors.
However, sustained investment in government debt may limit funds available for businesses seeking loans. The balance between public borrowing and private-sector financing will remain important for economic activity and investment.
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