Up to 100bps: NSS rates jump on rising PIBs yields

KARACHI: The government on Thursday increased the profit rates on almost all National Savings Schemes (NSSs) to absorb the benefit of a boost in its income from the Pakistan Investment Bonds. The raise in the rates is effective from March 25, 2022.

Analysts said the recent surge in cut-off yields may not go down well with the equity market as a jump in the yields of alternative instruments such as NSS could make the capital market look less appealing to investors.

According to an NSS statement, the rate on Regular Income Certificates (RICs) has been increased by 84bps to 11.04 percent per annum from 10.20 percent, while on Defence Saving Certificates (DSCs) it jumped from 10.32 percent to 10.92 percent, showing an increase of 60bps.

The rate of returns on Special Savings Certificates (SSC) has been increased by 100 bps from 10 percent to 11 percent. Behbood Savings Certificates (BSC), Pensioners’ Benefit Account (PBA) and Shuhada Family Welfare Account (SFWA) rates were jacked up to 12.72 percent per annum from 12.24 percent earlier, up by 48bps.

Meanwhile, profit rates on Saving Accounts (SA) remained unchanged at 8.25 percent. The government last week raised Rs193 billion by auctioning fixed-rate Pakistan Investment Bonds, with the cut-off yields on three-, five- and 10-year papers trending upwards.

The yield on the three-year PIB rose by 115 basis points (bps) to 11.8500 percent, five-year paper 100 bps to 11.7497 percent, and the rate on a 10-year paper jumped 88 bps to 11.7418 percent.

The State Bank of Pakistan (SBP) said it sold Rs54 billion worth of three-year papers and Rs80 billion of the five-year, and Rs59 billion worth of 10-year papers. The government rejected bids for 15-year and 20-year PIBs. Moreover, no bids were received for 30-year PIBs.

In February, the government reduced profit rates on different instruments of National Savings Schemes, primarily in a protective reaction to a nearly runaway inflation.

This reduction in profit rates followed the CPI (Consumer Price Index) based inflation’s touching 13 percent, the highest ever in two years. The rising inflation has eroded the purchasing power of fixed income groups such as salaried and pensioned ones.

The NSS aims to promote savings and development of ample savings account. All the certificates under the scheme are tailored for all types of investment. They are appropriate for investors interested in regular savings, fixed income, retirement planning, etc.