Pakistan’s latest Treasury Bill auction held on February 18, 2026 concluded with the government raising PKR 997 billion, more than double its initial target of PKR 450 billion, reflecting robust investor appetite for short-term sovereign debt instruments. Total bids submitted in the auction reached PKR 1,264.5 billion, indicating strong liquidity in the banking system and heightened demand amid an upward-moving yield environment.
The auction results showed that yields increased across most tenors, with the exception of the one-month Treasury Bill, which recorded a marginal decline. The one-month yield fell by 4.9 basis points to 10.1482 percent, compared with 10.1977 percent recorded in the previous auction on February 4, 2026. In contrast, the three-month, six-month, and twelve-month tenors experienced yield increases ranging between 8.7 and 20 basis points.
The three-month Treasury Bill yield rose to 10.2859 percent, reflecting a notable shift in short-term rate expectations. The six-month instrument saw its yield climb to 10.4437 percent, while the twelve-month paper closed at 10.5996 percent. The upward adjustment across these tenors signals a steeper short-term yield curve, aligning with prevailing market expectations of continued monetary tightening and inflationary pressure.
The weighted average yield, which represents the effective borrowing cost for the government in the auction, also moved upward. The three-month T-bill posted a weighted average yield of 10.2256 percent, marking an increase of 12.6 basis points from the prior auction. Similarly, the six-month and twelve-month instruments recorded increases of 12.9 basis points and 17.8 basis points, respectively. These movements highlight rising return expectations among investors positioning for potential rate adjustments and macroeconomic shifts.
Funding composition in the auction demonstrated a significant share of non-competitive participation. Competitive bids accounted for PKR 319.8 billion of the total amount raised, while non-competitive bids reached PKR 677.2 billion. The substantial non-competitive allocation reflects sustained institutional liquidity and preference for secure, government-backed instruments despite upward yield adjustments.
The broader rise in yields comes amid persistent inflationary pressures and a tightening monetary policy backdrop, both domestically and globally. Financial markets worldwide have witnessed elevated yields as central banks respond to price stability concerns. In Pakistan’s context, the movement in Treasury Bill rates mirrors investor recalibration toward higher short-term returns to hedge against inflation and market volatility.
At the same time, the strong participation level underscores continued confidence in sovereign instruments as a stable investment avenue. Banks and institutional investors appear willing to absorb higher supply at incrementally elevated rates, suggesting adequate liquidity buffers within the financial system.
The February 18 auction also aligns with the government’s broader fiscal strategy to manage financing requirements and sustain liquidity in the banking sector. By successfully exceeding its target, the government has secured short-term funding flexibility while maintaining market engagement across multiple maturities.
Market analysts anticipate that if inflationary pressures persist and monetary policy remains firm, the yield curve could tighten further in upcoming auctions. Continued monitoring of liquidity conditions and investor demand will remain central as authorities balance fiscal financing needs with broader macroeconomic stability objectives.
The outcome of this auction reinforces the role of Treasury Bills as a key instrument in Pakistan’s short-term debt management framework, reflecting both investor responsiveness and evolving rate expectations within the domestic financial market.
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