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Pakistan’s government raised Rs. 725.7 billion in its latest Treasury Bills (T-bill) auction on January 21, 2026, surpassing the Rs. 700 billion target, as investor demand remained robust and key yields fell to their lowest levels in more than four years, signalling growing expectations of monetary easing.
Total bids touched Rs. 1.85 trillion, reflecting strong market appetite. Cut-off yields declined by 15.8 to 30 basis points across all tenors. The 3-month T-bill yield fell to 8.9995%, the 6-month to 9.9492%, and the 12-month to 10.001%. This marked a return of short-term government borrowing costs to single-digit territory, a level last seen in November 2021.
According to Arif Habib Limited, short-term yields are now at a 4.2-year low, underscoring a decisive downward shift in Pakistan’s interest rate cycle.
The decline in yields is being driven by cooling inflation, improving macroeconomic indicators, and rising confidence that the State Bank of Pakistan may continue easing monetary policy in the coming months. Analysts note that while the short end of the yield curve has flattened sharply, longer tenors suggest gradual rate cuts rather than aggressive easing.
“The sustained drop in T-bill yields shows the market is increasingly comfortable with Pakistan’s macro outlook,” a market analyst said, adding that institutional participation remains strong, as reflected in sizeable non-competitive bids.
The bulk of funds over Rs. 264 billion was raised through 12-month T-bills, with notable inflows also seen in the 3-month segment. Compared to November 2021, when short-term cut-offs hovered near 8.5%, current levels reinforce the view that monetary conditions are turning more accommodative, potentially lowering borrowing costs for the government and supporting broader economic recovery.
