Govt raises Rs299bn through PIB auction; yields dip slightly

KARACHI: The government raised Rs299 billion from the auction of fixed-rate Pakistan Investment Bonds (PIBs) on Wednesday, with yields slightly falling across all tenors after a higher-than-expected interest rate cut by the central bank.

The raised amount was lower than the pre-auction target of Rs350 billion. According to the auction results released by the State Bank of Pakistan (SBP), the cut-off yield on the two-year paper fell by 15 basis points (bps) to 11.79 per cent. The three-year PIBs’ yield also declined by 19bps to 11.69 per cent. The yield on the five-year bond was down 20bps at 12.14 per cent. The yield on the 10-year bond also decreased by 20bps to 12.589 per cent. However, the bids were rejected for the 15-year paper.

The SBP on Monday lowered its benchmark interest rate by 100bps to 11 per cent, marking the continuation of a series of rate cuts that reduced the rate from a record high of 22 per cent after a brief hold in March. With the current reduction, the policy rate has fallen to its lowest level in three years, resulting in a cumulative cut of 11 percentage points since June 2024.

The SBP, in its monetary policy statement, noted a significant drop in inflation between March and April, mostly attributed to a fall in energy and food prices. Headline inflation eased to 0.3 per cent in April, down from 0.7 per cent in the previous month. Core inflation, which had remained around 9.0 per cent for several months, slowed to 8.0 per cent in April. This decline is largely due to a favourable base effect in the context of moderate demand conditions.