KARACHI: In the first auction after a surprise status quo in the monetary policy, the cut-off yields on the treasury bills were increased on Wednesday by up to 39 basis points, bringing the returns close to the State Bank’s policy rate of 10.50 per cent.

Before the monetary policy announced on Jan 26, returns on T-bills had mostly fallen to single digits, raising hopes of an interest rate cut of up to 100bps.

However, the interest rate remained unchanged, and some bankers cited that foreign investors were seeking high-yield bonds despite the higher risks.

The latest increase in yields could make T-bills attractive. Foreign investors have shown some interest in domestic bonds this fiscal year, but the uncertain geopolitical situation remains the biggest obstacle hampering inflows. The same was true of foreign direct investment, which fell sharply during the first half of this year.

The auction results show that the largest increase in T-bill rates was observed for the 12-month papers, with a 39bps increase to 10.39 per cent.

Similarly, the benchmark six-month papers offer 10.32pc, up from 9.94pc in the previous auction, increasing returns by 38bps. The government raised the highest amount of Rs315 billion for this tenor.

The cut-off yields on three-month and one-month were increased by 30bps each to 10.19pc.

The government received total bids of Rs2.354 trillion, while it picked Rs823bn, including Rs318bn from the non-bidding procedure. The target for the auction was Rs650bn while the maturity amount was Rs697bn.

Financial experts said higher T-bill rates would increase the government’s burden, as interest payments would rise further. The interest payment in FY26 would be around Rs8tr, the largest share of the budget for the current fiscal year.

Published in Dawn, February 5th, 2026