The State Bank of Pakistan (SBP) conducted a treasury bill (T-bill) auction on Wednesday, successfully raising Rs 557.388 billion in short-term debt. This achievement fell slightly short of the target of Rs 600 billion but helped address the debt maturity of Rs 654 billion.
The SBP had invited tenders for three-month, six-month, and 12-month T-bills through primary dealers on October 4, with the settlement scheduled for October 5.
The auction garnered significant interest from investors, with total bids reaching an impressive Rs 2.252 trillion for the shortest-term T-bill. In contrast, bids for the six-month and 12-month T-bills amounted to Rs 120 billion and Rs 443.655 billion, respectively.
The cut-off yield, which represents the highest accepted interest rate, stood at 22.5% for the three-month T-bill, 22.85% for the six-month T-bill, and 22.84% for the 12-month T-bill. These rates were largely consistent with the previous T-bill auction on September 20, where the cut-off yields for the same tenors were 22.78%, 22.8%, and 22.9%, respectively.
Notable changes in the cut-off yields included a 29 basis points (bps) decline for the three-month T-bill and a 6 bps drop for the 12-month T-bill. Conversely, the cut-off yield for the six-month T-bill increased by 5 bps.
The auction results revealed that the government successfully raised Rs 471 billion from three-month T-bills, Rs 18 billion from six-month T-bills, and Rs 68 billion from 12-month T-bills.
T-bills serve as short-term government securities with sovereign guarantees and fixed yields. They are essential tools for governments to access short-term funding. During the auction, primary dealers, which include banks and brokerage houses, submit bids at specific yield rates.
The cut-off yield, announced at the auction, determines which bids are accepted, with those below the rate being successful. Dealers pay a discounted amount to the SBP for the T-bills, which is later reimbursed at maturity, taking into account the T-bill’s yield.