The State Bank of Pakistan raised Rs581.7 billion through the auction of Market Treasury Bills (MTBs) on Wednesday, while simultaneously rejecting all bids submitted for the auction of 10-year Pakistan Investment Bonds (PIBs) with a floating rate structure. The results reflect a notable rise in short-term yields and a shift in market expectations around interest rates.
According to auction data released by the central bank, the MTB auction attracted total bids worth Rs915.45 billion in face value. This translated into a realized value of approximately Rs870.86 billion. Out of the total bids submitted by investors, the State Bank accepted Rs336.91 billion in face value under competitive bidding. The inclusion of non-competitive bids significantly increased the final amount raised through the auction. Non-competitive participation lifted the total acceptance to Rs581.67 billion in face value, equivalent to a realized value of Rs555.02 billion. The settlement for the auction is scheduled for March 5. The auction covered four short-term maturities including one-month, three-month, six-month, and 12-month treasury bills. Across these tenors, the central bank accepted bids at higher yields compared with the previous auction conducted on February 18, indicating a broad-based upward adjustment in short-term interest rates.
The one-month treasury bill was cut at a yield of 10.4955 percent, with the weighted average yield recorded at 10.3248 percent. Under competitive bidding, the State Bank accepted Rs89.30 billion in face value for this maturity. The three-month treasury bill cleared at a cut-off yield of 10.5001 percent and carried a weighted average yield of 10.4150 percent. Competitive bids amounting to Rs41.42 billion were accepted in this tenor. The six-month maturity recorded a cut-off yield of 10.7401 percent, with a weighted average yield of 10.7189 percent. In this segment, Rs63.17 billion was accepted under competitive bidding. The highest cut-off yield in the auction was observed in the 12-month treasury bill, which cleared at 10.9928 percent. The weighted average yield for the one-year tenor was recorded at 10.9144 percent, while Rs143.03 billion was accepted through competitive bids.
Non-competitive bids also played a significant role in the auction outcome. These bids totaled Rs244.75 billion in face value, of which Rs237.18 billion was realized. Non-competitive participation typically comes from institutional investors that seek guaranteed allocations without specifying yields. When compared with the previous auction held on February 18, yields increased across all maturities. The one-month tenor experienced a rise of 35 basis points, moving from 10.1482 percent to 10.4955 percent. The three-month treasury bill recorded an increase of 21 basis points, climbing from 10.2853 percent to 10.5001 percent. The six-month tenor posted a gain of 30 basis points, with the yield increasing from 10.4437 percent to 10.7401 percent. The most pronounced adjustment occurred in the 12-month maturity, where the cut-off yield rose by 39 basis points, moving from 10.5996 percent to 10.9928 percent. The consistent increase across the yield curve reflects a clear repricing of short- to medium-term government securities within a relatively short period of just over two weeks. Market participants interpret this upward shift as a sign of heightened expectations regarding interest rates and a rising term premium demanded by investors. Provincial governments were also active participants in the auction. Public sector entities placed bids amounting to Rs200 billion in three-month treasury bills, all of which were accepted. The large allocation underscores the scale of short-term liquidity deployment by provincial institutions in government securities.
In terms of distribution across maturities, the three-month treasury bill accounted for the largest share of total acceptance when both competitive and non-competitive bids were combined. A total of Rs260.29 billion was allocated in this tenor. The 12-month treasury bill followed with total acceptance of Rs154.80 billion, while Rs95.11 billion was allocated in the one-month maturity and Rs71.46 billion in the six-month paper. Alongside the treasury bill auction, the central bank also conducted an auction for 10-year Pakistan Investment Bonds with a floating rate structure, known as PFL Semi-Annual bonds. The auction received bids totaling Rs256.5 billion in face value. Despite the substantial interest from investors, the State Bank decided not to accept any bids in this auction. The quoted prices for the bonds ranged between 96.4831 and 94.1569. However, the central bank rejected all offers and made no allocations under either competitive or non-competitive categories. The outcome of both auctions reflects ongoing adjustments in Pakistan’s government securities market as investors reassess yield expectations and risk premiums in the current interest rate environment.
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