Yields of long-term Pakistan Investment bonds remain flat

Monetary policy on March 25

KARACHI: Pakistan Investment Bonds’ yields were remained largely flat at an auction on Wednesday, with investors almost uniformly expecting the central bank to maintain a status quo in interest rates at its monetary policy meeting due later this week.  

The central bank sold Pakistan Investment Bonds (PIBs) worth Rs28.567 billion, which is lower than the pre-auction target of Rs50 billion.   The auction summary revealed that the government fetched little amount through the sale of PIBs as banks were seeking higher yields amid falling earnings. 

The State Bank of Pakistan (SBP) sold Rs26.285 billion of three-year bonds at 6.4062 percent, lower than 6.4066 percent at the 22 February auction. The central bank sold Rs1.053 billion of five-year paper at 6.8993 percent, compared with 6.8994 percent previously. It sold Rs1.229 billion worth of 10-year debt at 7.9402 percent, down from 7.9406 percent at the preceding session. The central bank rejected all the bids in 20-year paper.  

 “By and large, the bonds and treasury yields remained stable and didn’t change investors’ view on interest rates scenario,” said a money market dealer.  “The five-year paper, which is sensitive to interest rate moves, showed only one basis point decline over the previous auction.”  

In a separate statement the SBP said its Monetary Policy Committee (MPC) is scheduled to meet on March 25 to unveil interest rate decision for the March-April 2017 period. The SBP kept its key policy rate unchanged at 5.75 percent at its previous meeting held on January 28.   

Most analysts believe the MPC will have little room for change in its current monetary policy stance and it is likely to adopt a cautious approach.  

In last monetary policy statement, the SBP expressed concern over growing current account deficit due to high import growth, caused by increasing CPEC-related machinery imports, decline in exports and slowdown in remittances.