KARACHI: The cut-off yields on treasury bills have again been raised by the government for almost all tenors and the highest rate has reached 11 per cent — almost 50 basis points more than the State Bank of Pakistan’s policy rate of 10.5pc.

The latest auction witnessed a 39bps increase for a 12-month paper on Wednesday. The government raised Rs155 billion at 11pc.

The yields on T-bills have been rising for the last three consecutive auctions, reflecting the policymakers’ approach towards the long-term view for inflation.

However, the Iran crisis has created a real fear about rising inflation. The financial market was full of analytical views about inflation, with most businessmen certain that tensions in the Gulf would trigger a price spiral.

Returns rise to 11pc — 50bps more than SBP policy rate

The closure of the Strait of Hormuz suspended the supply of crude from most countries of the Middle East, leading to a jump in oil prices to $90 per barrel. Since Pakistan depends largely on imported oil, crude prices are likely to shoot up in the domestic market and a knock-on effect will then hit prices of almost all goods and services.

The second highest amount of Rs260bn was raised for three-month tenor at 10.5pc, with a subsequent increase of 21.5bps.

The government raised the rate of one-month and six-month T-bills by 35bps and 30bps, respectively.It raised a total amount of Rs582bn through competitive and non-competitive bids against a target of Rs550bn.

While the financial sector believes there is no chance for interest rates to come down due to the Gulf conflict, they also expect a further increase in T-bill rates. The bids for the auction were Rs915bn while the government raised just Rs237bn through competitive bids and the rest Rs244bn from non-competitive bids.

It is also believed that with the increase in oil prices, the government would require more liquidity, forcing it to indulge itself in more bank borrowing

Banks have been earning record profits and their prospects for earning more in the current situation have further improved. The government rejected bids for 10-year Pakistan Investment Bonds. The bids offered Rs254bn for 10-year PIBs.

Published in Dawn, March 5th, 2026