PIBs’ yields decline

KARACHI: Yields on Pakistan Investment Bonds (PIBs) continued to drop at an auction on Wednesday, as investors assume further cut in the interest rates by the central bank in the upcoming monetary policy review meeting to be held next month.
Analysts said low inflation outlook also endorses market expectations of another 50 basis points slash in the policy rate.
The State Bank of Pakistan cut policy rate by 50bps to six percent in the last monetary policy meeting held in September.
The central bank sold Rs97.950 billion of three-, five-, and 10-year PIBs against the target of Rs50 billion fixed by the Ministry of Finance.
It sold Rs41.513 billion of three-year paper at a cut-off yield of 7.198 percent, down 7.3536 percent in the previous auction held on September 9. The cut-off yield on five-year government paper stood at 8.1805 percent, declined 8.3338 percent and 10-year papers at 9.2299 percent against 9.3406 percent.
The SBP sold Rs55.918 billion of five-year papers and Rs517.74 million of the 10-year papers.
"A multiyear low of consumer price index (CPI) inflation numbers in September trigger traders to lock-in their funds in the long-term government securities, as they expect another reduction in the interest rates,” said Muhammad Sohail, CEO at Topline Securities.
The CPI eased further to 1.32 percent in September, down from 1.75 percent last month. This saw some traders buy long-term bonds.