NSS profit rates raised by up to 250bps

KARACHI: The federal government on Monday raised the profit rates on various national savings certificates and schemes by up to 250 basis points, mostly to capitalise on their income from medium term government securities.

The new rates would be effective from May 10, 2022. The Central Directorate of National Savings (CDNS) increased the profit rate on Special Savings Certificates by 140 basis points to 12.40 percent, while the profit rate for Regular Income Certificates was boosted by 96 basis points to 12 percent.

The rate of interest for Bahbood Savings Certificates went up by 144 basis points to 14.16 percent, whereas the profit rate for Savings Accounts jumped by 250 basis points to 10.75 percent.

The NSS rates are linked with Pakistan Investment Bonds (PIB) for medium and long-term instruments and with T-bills for short-term securities. Analysts said the government raised the profit rates of National Saving Certificates upward to absorb the benefit of a boost of its income from PIBs.

In March this year, the CDNS had stepped up the profit rates on all national savings schemes. Arif Habib Limited’s Sana Taufiq said the government was offering higher rates on PIBs and on average -above 15 percent rates had been offered so far.

“As both the PIBs and National Saving Certificates are the government investment instruments, there was expectation that these rates would be revised upward,” Taufiq added. In the last auction the cut-off yields on Pakistan Investment Bonds (PIBs) zoomed to a 32-month high, plunging investors into concerns over widening budget deficit and rising government spending.

The government borrowed Rs375.8 billion through the auction of the PIBs with the raised amount being higher than the pre-auction target of Rs100 billion. The yield on three-year PIBs rose 145 basis points to 13.30 percent. On five-year paper 120 bps to 12.95 percent, and on 10-year bonds yields spiked 141 bps to 13.15 percent.

The bids were not received for 15-, 20-, and 30-year papers. The yields are highest since August 2019. Analysts said the NSS rates were revised after every PIBs auction to adjust them according to the interest rate situation in the market.