Pakistan’s government raised Rs657 billion through a treasury bill auction on Wednesday, missing its Rs800 billion target. Investors offered Rs2.77 trillion in total bids, showing strong demand, but the government held back from accepting all of it because investors wanted higher returns on longer-term bills. The six-month yield rose 10 basis points to 11.89%, while other yields moved only slightly. At face value, the amount raised came to Rs680 billion.
What Are T-Bills, and Why Does This Matter?
Treasury bills, or T-bills, are money loans issued by the government to banks and other investors, and typically have short terms. Later, the government reimburses the investor with a predetermined sum, and the gain of the investor from the exercise is the difference between the sum paid and the sum returned by the government, called the yield. If yields rise, it’s an indication that investors are demanding more money for the government to borrow. If the government is unable to achieve a desired yield, it can raise less money.
How the Yields Moved
Here’s how each type of T-bill performed in this auction:
- One-month T-bills: Yield fell 8 basis points to 11.3875%
- Three-month T-bills: Yield fell 5 basis points to 11.5992%
- Six-month T-bills: Yield rose 10 basis points to 11.89%
- Twelve-month T-bills: Yield stayed the same at 11.99%
Shorter-term bills got slightly cheaper for the government, but the six-month bill got more expensive, and investors weren’t willing to accept the government’s rate on the 12-month bill either.
