In its latest Market Treasury Bills (MTBs) auction held on Wednesday, the Government of Pakistan raised Rs424.35 billion through the State Bank of Pakistan (SBP), surpassing its original target of Rs361 billion. The auction saw strong demand despite a notable decline in cut-off yields across all tenors, reflecting changing investor expectations amid easing inflation and improved macroeconomic indicators.
The maturity amount for this auction was Rs200 billion, and the SBP managed to accept a higher-than-anticipated amount, highlighting the government’s strategic debt management and liquidity needs. The most notable shift came in the form of declining yields, which dropped across the board compared to the previous auction.
The cut-off yield for the one-month tenor stood at 10.8505 percent, a steep decline of 39 basis points. Yields for the three-month and six-month bills were set at 10.6750 percent and 10.6834 percent, dropping by 29 and 19 basis points respectively. The 12-month tenor settled at a cut-off yield of 10.6704 percent, showing a modest 10 basis points decline. This marks a clear trend of softening short-term borrowing costs, consistent with broader monetary easing expectations.
A total of Rs356.15 billion was offered by market participants, with SBP receiving bids worth Rs6.62 billion for one-month bills, Rs278 billion for three-month bills, Rs54.27 billion for six-month bills, and Rs17.26 billion for the twelve-month tenor. From these bids, the central bank accepted Rs13.17 billion, Rs290 billion, Rs68.27 billion, and Rs52.91 billion for the respective tenors.
Interestingly, the SBP accepted approximately 119.1 percent of the total bids received, pushing the bid-to-cover ratio down to 0.84 from 2.03 in the previous auction. This shift suggests either a more selective approach by institutional bidders or a broader strategic realignment based on expected changes in the interest rate environment.
The previous auction, held on July 09, 2025, had raised Rs1.49 trillion against a target of Rs1.35 trillion. At that time, yields were notably higher, with the cut-off set at 10.9997 percent for three-month, 10.8994 percent for six-month, and 10.8000 percent for twelve-month bills. The latest auction clearly reflects a downward movement in yields, which could indicate growing confidence in the country’s economic stabilization and a possible shift in monetary policy trajectory.
Analysts suggest that the declining cut-off rates could be a signal of easing inflationary pressures and may support expectations of a rate cut in the coming months, especially if macroeconomic data continues to show resilience. The downward pressure on yields also improves the cost of borrowing for the government, aiding in better debt servicing in a fiscally constrained environment.
This auction is part of the SBP’s ongoing effort to manage liquidity in the system while aligning short-term interest rates with the evolving economic outlook. As Pakistan continues to navigate complex fiscal dynamics, the role of domestic debt markets remains critical in ensuring financing flexibility without putting undue pressure on foreign reserves or external borrowing.