The government raised Rs. 725.7 billion in its latest Market Treasury Bills (T-bills) auction held on January 21, exceeding the target of Rs. 700 billion, as investor demand remained strong and yields declined further across all tenors.
According to auction results, total participation stood at Rs. 1.85 trillion. Cut-off yields declined by 15.8 basis points to 30 bps compared to the previous auction. The 3-month T-bill cut-off yield slipped to 8.9995 percent, while the 6-month cleared at 9.9492 percent and the 12-month at 10.001 percent.
The decline pushed 3-month and 6-month returns into single-digit territory last seen in November 2021. According to Arif Habib Limited (AHL), this marks a 4.2-year low in short-term government borrowing costs. The 12-month yield also eased to around 10 percent, only marginally above single digits.
Weighted average yields also moved lower across the curve, reinforcing the downward interest rate trend.
Market analysts attribute the falling yields to cooling inflation, expectations of further monetary easing, and improved macroeconomic stability. The yield curve flattened at the short end, while longer tenors continued to price in gradual rate cuts rather than abrupt easing.
Of the total amount raised, the bulk came from 12-month T-bills, with over Rs264 billion mobilised, followed by strong inflows in the 3-month segment. Non-competitive bids remained sizeable, reflecting sustained institutional participation.
Compared to November 2021, when 3-month and 6-month cut-offs hovered around 8.5 percent, the current levels indicate that Pakistan’s interest rate cycle has decisively turned downward. The continued fall in yields suggests that markets are positioning for a more accommodative monetary policy stance in the coming months.
