KARACHI: The cut-off yield on Pakistan’s benchmark 10-year Pakistan Investment Bond (PIB) fell to 12.9500 percent at an auction on Wednesday, the central bank said.
The State Bank of Pakistan also set a cut-off yield of 13.3900 percent on the 5-year Pakistan Investment Bond (PIB), from 13.4000 set at the last auction on August 3.
The three-year bond the cut-off yield was set at 13.9200 from 19.9473 percent.
The central bank also set cut-off yields of 11.4103 and 11.6142 percent for the 20- and 30-year PIBs, compared with 11.4016 percent and 11.6802 percent set in the last auction.
The central bank said it received no bids on 15-, 20-, and 30-year papers.
Dealers said the auction result was in line with the market expectations.
“The decline in yields is little surprising, as the cut-offs given by the central bank are below the existing levels in the secondary market,” a dealer said. “The falling yields would stoke speculations over a cut in interest rate.”
The SBP kept its benchmark target rate at 15 percent late last month. The status quo decision taken by the central bank was primarily because of administrative steps taken to curtail imports and plans for strong fiscal consolidation in FY23.
The central bank said it sold a total of Rs215 billion worth of PIBs, after receiving bids worth about Rs550 billion. It had set a combined pre-auction target of Rs175 billion.
It was the third PIB auction to be conducted in the current fiscal year, which began on July 1.
The government had launched long-term PIBs in December 2000 to tap institutional investment and set a benchmark for corporate bond yields.
The government plans to borrow Rs6.775 trillion from the domestic debt market in August-October to meet its financing requirements.
It would raise Rs5.350 trillion from the auctions of Market Treasury Bills (MTBs) and Rs1.125 trillion through the sale of fixed and floating rate PIBs.
The SBP would sell Rs525 billion worth of fixed-rate PIBs and Rs150 billion worth of five-, and Rs150 billion worth of 10-year floating rate PIBs. It would also auction a three-year Rs150 billion and a two-year Rs150 billion floating rate PIB.
The SBP would also sell Rs210 billion worth of variable rental rate five-year Government of Pakistan Ijara Sukuk and Rs90 billion worth of fixed rental rate domestic Islamic bonds.
During August-October FY2023, Rs6.384 trillion worth of PIBs will mature. The government is not cutting its domestic market borrowing plan, despite the revival of IMF bailout programme earlier this month.
