KARACHI: Margin on long-term government investment bonds fell up to 50 basis points (bps) in the auction held on Tuesday.
The State Bank of Pakistan (SBP) conducted the auction for the sale of 3-,5-, 10-, 15-, 20- and 30-year Pakistan Investment Bonds (PIBs) on January 16, 2024 with settlement date of January 17, 2024.
Overall, bids worth Rs 460 billion were received for the 3-, 5- and 10- year PIBs, while no bid was submitted for 10- and 20-year long-term government securities. The federal government borrowed an amount of Rs 162 billion as against the target of Rs 190 billion for this auction.
Rs241.528bn mopped up in auction for PIBs
The amount also included Rs 123.195 billion of competitive bids, Rs 34.333 non-competitive bids and Rs 4.55 billion of short selling.
The cut-off yield of long -term papers declined by 38 to 50 bps in the auction held on Tuesday. An amount of Rs 81.1 billion was raised through sale of 3-year PIBs and its cut-off yield declined by 40 bps to 16.80 percent. Cut-off yield of 5-year investment bonds down by 38 bps to 15.50 percent against sale of Rs 40.57 billion worth bonds.
In addition, 10-year bonds’ cut-off fell by 50 bps to 14.50 percent with a borrowed amount of Rs 1.521 billion. Similarly, Rs 34 billion were raised against the non-competitive bids.
It may be mentioned here that during the last few months, the interest rate on short term government papers has fallen by more than 3 percent. On last Wednesday cut-off yields of Government of Pakistan Market Treasury Bills fell ranging 44 to 59 bps and the cut-off yield on 3, 6, and 12-month bonds declined to 20.99 percent, 20.96 percent and 20.84 percent, respectively.
Similarly, 6-month lending benchmark Karachi Interbank Offered Rate (KIBOR) was down from a peak of nearly 25 percent in Sep 2023 to less than 20.77 percent on Tuesday.
The KIBOR is a daily basis interest rate at which banks offer to lend funds to other banks and mainly the banks also use it as a benchmark for lending to the corporate or private sector.
Analysts said the declining trend in the long-term and short-term government securities is a positive indication and reflect that the monetary policy committee of the SBP may ease the monetary policy to facilitate the private sector.
Copyright Business Recorder, 2024
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