Government raises Rs12.550bln through PIBs auction

KARACHI: The government on Wednesday raised Rs12.550 billion through an auction of fixed rate Pakistan Investment Bonds (PIBs) to help finance the budget deficit.

The fetched amount was lower than the pre-auction target of Rs125 billion.

The cut-off yield for three-year PIBs remained unchanged at 8.2400 percent at which the government borrowed Rs1.550 billion.

Through the 15-year bonds, the government raised Rs3 billion at the cut-off yield of 10.000 percent. The yield was 9.9800 percent in the previous auction held on November 11.

An amount of Rs8 billion was fetched for 20 years PIBs at a yield of 10.5800 percent, which was slightly higher than the previous yield of 10.5498 percent.

The bids for the five and the 10 years were rejected by the government.

Analysts said investors expect the interest rates, which hover at 7.0 percent since September, to start rising in the medium-term.

Many analysts anticipate the policy rate to remain flat until the first quarter of 2021.

“We expect the State Bank of Pakistan (SBP) to keep rates unchanged in 2021. We believe the policy rate has bottomed at 7.0 percent, following cumulative cuts of 625bps (basis points) in 2020 YTD, including a 100bps cut in June. But risks are skewed towards further easing should the real-sector outlook deteriorate further, in our view,” the Standard Chartered Bank said in a report titled Global Focus-Economic Outlook 2021.

The report expects the average consumer price index inflation to hover at 6.6 percent for this fiscal year.

National Consumer Price Index inflation eased to 8.3 percent in November from 8.9 percent in October.

The acceptances of both fixed and floating rate PIBs remained at an elevated level during FY20, according to the SBP’s annual report on the state of economy for FY2019/20. The government raised a cumulative Rs1.97 trillion from PIBs in FY20 compared to only Rs0.34 trillion in FY19 on net of maturity basis. This was indicative of a clear shift in the government’s debt management strategy, it said.