'No PIB auction this month'

Pakistan will not hold an auction of its long-term investment bonds this month as the government has enough funds, a senior Finance Ministry official said on Wednesday. "We don't need money to finance the fiscal deficit this year," said Ashfaque Hasan Khan, Director General, Debt Management Office. However, bankers and analysts said the government took the decision not to sell the long-term bonds at a time when short-term interest rates were rising.
The government announced in November that it would auction Rs 11 billion worth of Pakistan Investment Bonds (PIBs) in the fiscal year ending June 30. Since then, it has rejected all bids at two consecutive bond auctions in November and March.
In the current quarter, the government was scheduled to auction another Rs 5 billion of PIBs. "The PIBs are a source of borrowing for the government, and we don't need money," Ashfaque told Reuters.
Pakistan has increased interest rates aggressively in recent months to counter rising inflation. In April, the State Bank of Pakistan (SBP) raised its key discount rate to 9 percent from 7.5 percent, and has since allowed yields to rise sharply at the Treasury Bill auctions.
"I think the government has taken the right decision, and probably they should not be selling any long-term bonds until the time short-term interest rates settled down," a treasurer at a domestic bank said.
In the last auction held on June 8, the cut-off yield on benchmark six-month paper came at 7.98 percent, while the weighted annual yield on the paper stood at 7.82 percent.
"The central bank is raising short-term yields to counter inflation, and once the rising trend in inflation is checked, the rates will start coming down again," one banker said.
Earlier in the day, the Federal Bureau of Statistics (FBS) said the consumer price index was 9.84 percent higher in May than a year earlier, but the annual inflation rate was down from 11.10 percent in April. A senior banker said the government was still pursuing a growth-oriented agenda, which meant rates would not go very high.
"In the present scenario, the overall infrastructure of interest rates does not seem sustainable, and short-end rates will ease ultimately to back up the government's growth agenda," he said. "I think the government will now hold a PIB auction somewhere in November or December."
Asif Qureshi, head of research at brokers Invisor Securities, said the government did not want to conduct a long-term bond auction now, when interest rates are on the rise, as it would increase its fiscal cost.