Following a 150 basis points cut in the key policy rate to 10.5 percent by the State Bank of Pakistan (SBP), the cut-off yield (interest rate) of Pakistan Investment Bonds (PIBs) decreased to 1.37 percent in the auction held on Wednesday. State Bank conducted the second auction of long term investment government papers for the current fiscal year on August 15, 2012 and received bids which were less than first auction''s.
In the second auction, some Rs 70.949 billion worth bids were received as compared to Rs 94.404 billion bids in the first auction. The first auction was held on July 18, 2012. According to analysts, it was already being expected that PIBs rate will be reduced in the auction due to SBP''s move to ease monetary stance.
The rate of PIBs was already on decline in the secondary market for the last one week, when inflation figures were issued by Pakistan Statistics Bureau (PBS), they added. Auction was for 3-, 5-, 10- and 20-year PIBs. However, financial institutions avoided to invest in 20-year papers and not a single bid was received for side papers. On Wednesday, SBP received Rs 71.389 billion worth bids with a realised amount of Rs 70.949 billion for the sale of 3-, 5- and 10-year bonds as against target of Rs 30 billion. SBP accepted Rs 28.684 billion worth bids with a realised amount of Rs 28.640 billion, which is less than the target.
A cut-off yield of 3-year PIBs was down by 1.3686 percent to 11.2994 percent with a realised amount of Rs 11.491 billion. Cut-off yield of 5-year papers was declined by 1.3727 percent to 11.6990 percent with accepted bids of Rs 13.022 billion. In addition, with a decline of 1.2809 percent cut-off yield of 10-year bonds stood at 12.0487 percent and Rs 4.126 billion bids were accepted.
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