Govt raises Rs114bn through local Sukuk

ISLAMABAD: The government has raised Shariah-compliant domestic Sukuk bonds to generate Rs114 billion.

The total received bids for domestic Sukuk bonds stand at Rs233 billion but the government preferred to raise only Rs114 billion because of a lack of asset-backed guarantees.

According to the details, the total bids were around Rs233 billion. The government accepted three years of fixed-rate bonds of Rs300 million at the rate of 16.05 percent (less than the last cut-off of 16.19 percent). For a five5-year fixed rate bond, it raised Rs10.4 billion at 15.74 percent (the previous cut-off was 15.75 perecent).

For 3-year floater bond, it raised Rs32 billion at 0.2 percent above the T-bills rate. The previous cut-off was 21 percent but this is 0.72 percent less than conventional instruments of the same tenor. For five-year floater bond, it raised Rs71 billion at 0.30 percent (previous spread was -0.1 percent). Again, if compared with five-year PIB floater, it is one percent less.

Earlier on Wednesday, the government conducted an auction for PIB Fixed Rate Instruments, and observed rates below the previous cut-off rates across all instruments. This is despite the SBP maintaining Policy Rate unchanged.

The government accepted a cumulative amount of Rs360 billion, surpassing the initial target of Rs190 billion as it picked Rs553 billion less than its target on the previous auction held on December 13.

The details of the proposal for auction showed that for PIB three years, it raised Rs222 billion at 17.1999 percent (20 Bps below the previous cut-off rate), for PIB five year, the government raised Rs36 billion at 15.88 percent (7 Bps below the previous cut-off rate) and PIB 10 year, it raised Rs102 billion at 15 percent (10 Bps below the previous cut-off rate).

Investors are predicting their increased confidence on long-term bonds driven by anticipation of rate cut in policy rate by early 2024. Exploring broader implications of Pakistan’s local currency debt restructuring as the government seemed moving towards short-term to long-term maturity of domestic debt.