Pakistan’s government raised more than Rs1 trillion through fresh auctions of Treasury Bills (T-bills) and Pakistan Investment Bonds (PIBs), reflecting strong demand from banks and easing short-term yields. The latest borrowing comes as market expectations build around a potential State Bank of Pakistan (SBP) policy rate cut in the next monetary policy review.
According to the State Bank of Pakistan, the government mobilized Rs1.087 trillion in total, including Rs979.3 billion through T-bills and Rs108 billion through 10-year PIBs. The amount accepted in T-bills exceeded the auction target, highlighting strong liquidity in the banking system and aggressive bidding for government securities.
Falling T-Bill Yields Signal Rate-Cut Expectations
A major highlight of the auction was the decline in cut-off yields across all T-bill maturities. The cut-off yields were reduced by as much as 34 basis points, suggesting investors are pricing in lower interest rates ahead. Market participants believe the SBP may consider a further 50 basis points (bps) reduction in the policy rate at the next review, and the lower T-bill returns reflect these expectations.
Strong market liquidity was visible in the total bids, which reached around Rs2.5 trillion for T-bills. Even though the government’s target for the auction was Rs850 billion, it accepted Rs979 billion, using the demand to raise more funds than initially planned.
- T-bills raised by tenor: 12-month Rs720bn, 3-month Rs46.6bn, 1-month Rs41.5bn, 6-month Rs14.75bn.
Investors showed the strongest preference for 12-month T-bills, where bids reached Rs1.374 trillion, making it the most in-demand tenor during the auction.
Domestic Debt Update: Yearly Rise, Slower Growth in Early FY26
While short-term borrowing remains active, Pakistan’s domestic debt has increased significantly over the past year. Domestic debt climbed by Rs6.035 trillion to Rs54.619 trillion in November 2025, compared with Rs48.584 trillion in November 2024, showing a substantial rise in central government domestic financing.
However, borrowing during the first five months of FY26 (July–November) remained relatively low, with domestic debt rising by only Rs144 billion. This indicates most of the debt buildup occurred in the second half of the previous fiscal year (FY25), while early FY26 saw reduced borrowing pressure.
A major reason behind the slower debt increase in early FY26 was the reported Rs2.7 trillion liquidity support from the SBP in the form of profits. This additional liquidity can help the government manage financing needs and may support efforts to keep the fiscal deficit within the FY26 target.
Shift Toward Long-Term PIBs to Reduce Repayment Pressure
Another key trend is the government’s increasing reliance on long-term borrowing. The rise in domestic debt over the last 12 months was largely driven by PIBs. Borrowing through PIBs increased by Rs5.4 trillion between November 2024 and November 2025, out of the total Rs6.035 trillion increase in domestic debt during the same period.
This approach suggests the government is focusing more on long-term instruments to avoid frequent refinancing and quick repayments. It also kept short-term T-bill borrowing below maturity levels, as the maturity amount was Rs875 billion while the auction target was Rs850 billion.
What This Means for Investors and the Economy
The latest T-bill and PIB auction shows strong demand for government debt instruments, improving liquidity conditions, and declining short-term yields. For investors, falling cut-off yields can indicate a lower return environment ahead, while for policymakers, it signals that markets may be aligned with a softer interest rate outlook.
At the same time, Pakistan’s domestic debt stock remains high, and the shift toward long-term PIBs highlights the government’s strategy to manage repayment risks. The next SBP monetary policy decision will be a key factor in determining whether yields continue to decline and how borrowing costs evolve in the coming months.
