Govt raises Rs83 billion from bonds sale, falls short of target

KARACHI: The government raised Rs83 billion from the sale of fixed-rate Pakistan Investment Bonds on Wednesday, missing its target of Rs125 billion, as investors stayed cautious amid uncertainty over inflation and gas prices.

The government sold three-, five- and 10-year bonds at yields that were mostly unchanged from the previous auction in January, according to the central bank's data.

The cut-off yield on the five-year bond rose slightly by 5 basis points to 15.5499 percent, while the yields on the three- and 10-year bonds remained flat at 16.7999 percent and 14.500 percent, respectively.

No bids were received for the 15-, 20- and 30-year bonds. Analysts said the auction results reflected the market's reluctance to lock in funds for longer periods due to the lack of clarity on the inflation outlook and the expected hike in gas prices. On the other hand, despite needing more cash to cover the budget deficit, the government doesn't seem willing to generate funds at higher rates.

Analysts said the market is waiting for some direction from the government on the gas price revision and its impact on inflation.

The Economic Coordination Committee is expected to consider a revision in gas prices, which will then be presented to the federal cabinet for final approval, after which the Oil and Gas Regulatory Authority (OGRA) will issue a revised gas prices notification, Arif Habib Limited said, citing news reports.

The total direct weightage of gas price in the national consumer price index basket is 0.66 percent. “Due to the high base impact as significant fixed charges increased during the last tariff revision, we estimated a minimal 10.6 percent increase in gas prices across all income quintiles (other than protected class), which could potentially result in an inflationary increase of about 43 bps,” it said.

“With the current inflation rate standing at 28.3 percent as of January, we anticipate that taking this effect into account, the CPI for FY24 will likely reach 24.91 percent YoY.” Analysts expect the monetary policy easing to start in March.

The State Bank of Pakistan maintained the policy rate at 22 percent last month as the frequent and sizeable adjustments in administered energy prices slowed down the pace of decline in inflation anticipated earlier.