KARACHI: The government on Wednesday raised the cut-off yields on treasury bills by up to 75 basis points, significantly surpassing returns on risk-free papers above the State Bank of Pakistan’s policy rate of 11.5 per cent.
In the latest T-bill auction, the government raised profit rates on all tenors, fuelling speculation in the financial market about a possible interest rate hike at the next SBP Monetary Policy Committee meeting on Oct 26.
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. The government raised Rs88.3 billion through the six-month bills.
The rate on three-month T-bills rose 61bps to 11.99pc, up from 11.38pc in the previous auction. The government raised Rs143.86bn for this tenor.
Govt raises returns on different tenors by up to 75bps
Despite the smallest increase of 45bps, the 12-month T-bill rate reached 12.49pc, 99bps above the SBP’s policy rate. The wide gap between T-bill yields and the policy rate surprised market participants and fuelled speculation about a possible policy rate hike. The government raised Rs29.66bn through this tenor.
Another indicator of a possible interest rate hike is rising inflation, which stood at 11.1pc in August and is expected to remain around 10.75pc in September. International oil prices also remain elevated, reaching as high as $100 per barrel, while the Gulf war shows no signs of ending.
Financial experts said the country could face further inflationary pressures as Pakistan imports around 70pc of its fuel requirements.
The Gulf war has already affected several countries, including Pakistan, as their dependence on imported oil and gas has made energy costs increasingly expensive.
Moreover, both foreign and domestic investment have remained stuck at pre-war levels recorded on Feb 28, 2026, as risks have increased. This is slowing economic growth while adding to inflationary pressures.
Total bids received in the auction amounted to Rs2.726 trillion, while the government raised Rs880bn — Rs400.25bn through competitive bids and Rs479.8bn through non-competitive bids.
Financial experts said the interest rate could be increased at the next monetary policy review if inflation remains elevated at around 11pc, while some believe conditions have reached a point where a higher policy rate may be warranted.
“If cheaper money is available amid higher inflation, it will further fuel inflation, which is not what the government or the State Bank wants,” a financial expert said.
Published in Dawn, October 1st, 2026
