PIBs yields up

KARACHI: Pakistan Investment Bonds’ yields rose on all tenors on Wednesday, as investors believe interest rates have bottomed down and major fall in rates already occurred.

The government managed to raise Rs112 billion through an auction of three-, five-, 10-, 15 and 20 year PIBs. The three-year PIBs cut-off yield rose 33 basis points to 7.9700 percent.

The State Bank of Pakistan (SBP) sold Rs71 billion worth of short tenor paper.

The five-year yield increased 39 bps to 8.4400 percent. The SBP sold Rs21 billion of five-year PIBs.

Cut-off yield on 10-year paper was up 30bps to 8.9900 percent. The raised amount through the auction of this paper was Rs16 billion.

However, the cut-off yield on 15 years paper fell 7bps to 9.900 percent. The raised amount was Rs4 billion.

Analysts said the latest auction shows low expectations of rate cut in the market. The SBP has slashed policy rate by a cumulative 525bps to eight percent since March 17.

Inflation fell to 8.2 percent in May from 8.5 percent in April.

The government is likely to remain dependent on bank borrowing to meet its funding requirements.

The government is estimating a fiscal deficit of 9.1 percent of gross domestic product for the current fiscal year.

However, many analysts expect the deficit could range between 9-10 percent of GDP in FY2020.

The government has set a fiscal deficit target of seven percent of GDP for FY2021 and a primary deficit of 0.5 percent of GDP.