KARACHI: The government on Wednesday raised Rs546 billion through the sale of long-term Pakistan Investment Bonds (PIB) while sharply reducing cut-off yields by up to 70 basis points, pointing to expectations of lower interest rates ahead. Strong participation kept the borrowing within the Rs450bn auction target, although the government also secured additional sums through non-competitive bids and short selling.
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Data from the State Bank of Pakistan showed the government borrowed Rs41.9bn through non-competitive bids and another Rs54.4bn via short selling. This brought the total mobilisation to Rs546.3bn, reflecting robust appetite for long-tenor instruments.
The rate cuts followed a similar trend seen in the January 7 treasury bill auction, where cut-off yields declined by as much as 34 basis points. Analysts say the two auctions collectively indicate that the Monetary Policy Committee (MPC) may opt for another interest rate cut at its upcoming meeting on Jan 26, potentially trimming the policy rate by at least 50bps.
Business groups and industrial bodies have been vocal in seeking deeper monetary easing, especially after headline inflation eased in December 2025 compared with the previous month. Trade associations have called for a sizeable reduction of up to 300bps to stimulate borrowing and support economic activity.
In terms of tenors, the auction generated the highest funding of Rs126bn for 10-year bonds, followed by Rs125bn for three-year paper. Market players noted that buying interest in longer maturities mirrors expectations of a downward trajectory in borrowing costs.
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Bond dealers said the latest yield adjustments align with improving macroeconomic sentiment, moderating inflationary pressures and anticipation of policy easing. However, they added that geopolitical risks and energy price volatility remain potential headwinds for monetary confidence.