KARACHI: The six-month yield on Treasury bills jumped to a one-and-a-half-year high on Thursday as concerns grow over the chances of another rate hike by the central bank in the next policy review, fuelled by rising energy prices linked to the ongoing conflict in the Middle East.
The six-month T-bill yield has crossed the 12 per cent mark and is currently at 12.26 per cent, the highest level seen in 1.5 years, according to Topline Securities.“Rising yields are attributed to higher inflation expectations amidst elevated oil prices,” it said. “Recently, the six-month yield touched a bottom of 9.83 per cent in January 2026; from that level, yields are up 243 basis points (bps),” it added.
In the T-bill auction held on Wednesday, the government raised Rs950 billion against a target of Rs1 trillion, while total participation remained exceptionally strong at Rs2.56 trillion, reflecting ample liquidity in the system.
“The sharp increase in cut-off yields -- particularly the 40 bps rise in 12-month papers and 37 bps increase in six-month tenor -- indicates growing market expectations of further monetary tightening following the SBP’s recent 100 bps policy rate hike to 11.5 per cent,” said Chase Securities in a note.
“With May 2026 inflation expectations ranging between 12-13 per cent, investors are increasingly cautious that the SBP could consider another rate hike in the upcoming monetary policy,” it added.
The State Bank of Pakistan (SBP) will announce its next monetary policy on June 15. The war in the Middle East has intensified risks to the macroeconomic outlook. The rising global energy prices, increased freight charges and insurance premiums, as well as supply chain disruptions, all have contributed to the current uncertainty.
Oil prices still hovered around $100 per barrel. The SBP expects the current supply shock to push inflation into double digits in the coming months before it starts to ease subsequently. However, it anticipates inflation to stay above the upper bound of the target range of 5-7 per cent for most of fiscal year 2027.
The consumer price index inflation increased to 10.9 per cent year-on-year (YoY) in April, compared to 7.3 per cent in the previous month.
