Govt raises Rs382bn via PIBs sale, yields fall by 4-55bps

KARACHI: The government raised Rs382 billion through the auction of fixed-rate Pakistan Investment Bonds (PIBs) on Wednesday, surpassing the Rs350 billion target, and the yields on the papers fell across the board.

The cut-off yield on a two-year PIB declined by 55 basis points (bps) to 12.5 per cent. The yield on a three-year paper remained flat at 12.49 per cent. The yield on a five-year bond decreased by 11 bps to 12.59 per cent. The yield on a 10-year paper fell by 4 bps to 12.79 percent.

The State Bank of Pakistan (SBP) cut its key interest rate by 200 basis points to 13 per cent for the fifth consecutive meeting on Monday. This brings the total reduction to 900bps since June 2024.

The central bank said that headline inflation fell to 4.9 per cent year-on-year in November, driven by a continued decrease in food inflation and the diminishing impact of increased gas tariffs. However, it also pointed out that core inflation, which stands at 9.7 per cent, remains stubbornly high, and the inflation expectations of consumers and businesses continue to be volatile.

The SBP’s Monetary Policy Committee said in a monetary policy statement that inflation may remain volatile in the near term before stabilising in the target range.The SBP expects that inflation will average significantly below its earlier forecast range of 11.5 per cent to 13.5 per cent. The precise inflation range is expected to be projected in the upcoming policy meeting scheduled for January.

According to the central bank, the inflation outlook remains vulnerable to several risks, including additional measures to address the revenue shortfall, a resurgence in food inflation and rising global commodity prices.