Yields on Pakistan’s short-term government securities have dropped to their lowest level in more than four years, with Treasury Bill (T-bill) cut-off yields returning to single-digit territory following the latest auction conducted by the State Bank of Pakistan (SBP).
At Wednesday’s auction, the 3-month and 6-month T-bill yields fell below 10 percent, a level last recorded in November 2021, while the 12-month paper cleared slightly higher at around 10 percent. The sharp decline underscores a clear shift in the country’s interest-rate cycle amid easing inflation and improving macroeconomic indicators.
Strong Demand at SBP T-Bill Auction
The SBP conducted the auction for 1-month, 3-month, 6-month and 12-month Market Treasury Bills (MTBs) on January 21, 2026, with settlement scheduled for January 22, 2026. Total bids amounted to Rs1.849 trillion, reflecting strong investor appetite, while the central bank accepted Rs725.7 billion, including Rs293.2 billion in competitive bids and Rs432.5 billion in non-competitive bids.
Cut-Off Yields Decline Across All Tenors
Yields declined across the board. The 1-month T-bill yield fell by 30 basis points to 9.8996 percent, while the 3-month cut-off dropped by 25.1 basis points to 9.8995 percent. The 6-month tenor eased by 21 basis points to 9.9492 percent, and the 12-month yield declined by 16 basis points to settle at 10 percent.
Notably, yields across all maturities are now at a 4.2-year low, highlighting a sustained downward trend.
Analysts See Dovish Outlook Ahead
Market analysts attributed the decline to cooling inflation expectations, improved macroeconomic stability, and a dovish monetary policy outlook, with expectations of further easing by the SBP. The last comparable yield environment was seen in November 2021, when cut-offs averaged around 8.5 percent for 3- and 6-month papers.
Overall, the auction results signal robust demand for government debt, reinforcing confidence in Pakistan’s disinflationary trajectory and prospects for further normalization in the yield curve.