Govt keeps treasury bill returns higher over policy rate
Why This Matters
Key context: <p>KARACHI: The government kept treasury bill rates almost unchanged in an auction held on Wednesday, but the returns on all tenors of T-bills remained higher than the State Bank’s policy rate of 11.5 per cent.</p> <p>This was the last auction of T-bills before announcement of the next monetary policy on Oct 26. The results showed that the government raised Rs417.6 billion through this auction and another Rs267.9bn through non-competitive bids, making a total of Rs685.5bn.</p> <p>But investors, mostly banks, were eager to park their maximum liquidity in government papers as the option for domestic lending looks extremely limited.</p> <p>According to financial experts, investors are shy of taking risks amid the Gulf war and the political uncertainty in the country.</p> <p>Domestic investors have been hoping over the last three years for initiatives by the government to stimulate the economy. The IMF had forecast a growth rate of 3.5pc for FY27, but the finance minister said on Tuesday he hoped for a 4pc growth.</p> <p>The absence of domestic investments has created a serious problem for the country while policymakers are unable to bring them back into the economy.</p> <h2><a id="poverty-rising" href="#poverty-rising" class="heading-permalink" aria-hidden="true" tabindex="-1" title="Permalink"></a>Poverty rising</h2> <p>The World Bank says poverty has been rising in the country and 48pc Pakistanis are now living below the poverty line.</p> <p>“We are trying to protect the money already we have invested. The government has no idea how to stimulate a dormant economy mood,” said a businessman in Karachi.</p> <p>The government relies heavily on bank money and the borrowing size has been increasing each year, piling up a huge domestic debt. The latest auction reflects both the government’s needs and banks’ eagerness to invest in securities.</p> <p>The investors’ bids were Rs2.6 trillion at this auction — down from Rs2.7tr at the previous one on Oct 1.</p> <p>The first quarter is already over without fresh borrowing. By the private sector. In FY26 the private sector had borrowed Rs1.4tr while in FY25 it was Rs1tr.</p> <p>Bankers said most of the amount borrowed by the private sector was meant for working capital; it means no long-term investment.</p> <p>At the previous auction the largest increase of 75bps was recorded in the benchmark six-month treasury bills, with the rate rising to 12.45pc from 11.70pc in the previous auction held on Sept 16.</p> <p>At the current auction the six-month T-bills noted a decline of 6bps to 12.39 per cent from 12.45 per cent in the previous auction, still 89 basis points higher than policy rate.</p> <p>The State Bank kept the return on T-bills almost 99 basis points higher than the interest rate at the previous auction and the same was maintained on Wednesday.</p> <p><em>Published in Dawn, October 15th, 2026</em></p> This development from dawn.com highlights ongoing changes in the sector.
KARACHI: The government kept treasury bill rates almost unchanged in an auction held on Wednesday, but the returns on all tenors of T-bills remained higher than the State Bank’s policy rate of 11.5 per cent. This was the last auction of T-bills before announcement of the next monetary policy on Oct 26. The results showed that the government raised Rs417.6 billion through this auction and another Rs267.9bn through non-competitive bids, making a total of Rs685.5bn. But investors, mostly banks, were eager to park their maximum liquidity in government papers as the option for domestic lending looks extremely limited. According to financial experts, investors are shy of taking risks amid the Gulf war and the political uncertainty in the country. Domestic investors have been hoping over the last three years for initiatives by the government to stimulate the economy. The IMF had forecast a growth rate of 3.5pc for FY27, but the finance minister said on Tuesday he hoped for a 4pc growth. The absence of domestic investments has created a serious problem for the country while policymakers are unable to bring them back into the economy. Poverty rising The World Bank says poverty has been rising in the country and 48pc Pakistanis are now living below the poverty line. “We are trying to protect the money already we have invested. The government has no idea how to stimulate a dormant economy mood,” said a businessman in Karachi. The government relies heavily on bank money and the borrowing size has been increasing each year, piling up a huge domestic debt. The latest auction reflects both the government’s needs and banks’ eagerness to invest in securities. The investors’ bids were Rs2.6 trillion at this auction — down from Rs2.7tr at the previous one on Oct 1. The first quarter is already over without fresh borrowing. By the private sector. In FY26 the private sector had borrowed Rs1.4tr while in FY25 it was Rs1tr. Bankers said most of the amount borrowed by the private sector was meant for working capital; it means no long-term investment. At the previous auction the largest increase of 75bps was recorded in the benchmark six-month treasury bills, with the rate rising to 12.45pc from 11.70pc in the previous auction held on Sept 16. At the current auction the six-month T-bills noted a decline of 6bps to 12.39 per cent from 12.45 per cent in the previous auction, still 89 basis points higher than policy rate. The State Bank kept the return on T-bills almost 99 basis points higher than the interest rate at the previous auction and the same was maintained on Wednesday. Published in Dawn, October 15th, 2026
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