The cut-off yield on Pakistan Investment Bonds (PIBs) declined up to 49 basis points (bps) in the auction held Wednesday. According to SBP, the auction for the sale of long-term government securities of 3-, 5-, 10-, and 20-year maturity was held on August 12, 2015 with coupon rates as 8.75 percent, 9.25 percent, 9.75 percent and 10.75 percent, respectively.
Banks aggressively participated as they are expecting a further cut in the key policy rate in future on lower inflation outlook. Overall, bids amounting to Rs 364.404 billion or total realised amount of Rs 384.028 billion were received for 3-, 5- and 10-year PIBs against the target of Rs 50 billion. However, no bid was received for 20-year PIBs.
Bids amounting to some Rs 217.458 billion were received for 3-year, Rs 119.432 billion for 5-year and Rs 27.15 billion for 10-year bonds. Overall, bids amounting to Rs 63.118 (Rs 67.024 billion total realised amount) were accepted for 3-, 5- and 10-year long-term government securities. The borrowed amount is higher than the target of Rs 50 billion set by the federal government for this auction.
Some 7.6004 percent cut-off yield, down 49 bps, was fixed for 3-year long-term bonds with accepted bids amounting to Rs 51.917 billion (total realised value). With 48 bps decline, the cut-off yield of 5-year PIBs was set at 8.5181 percent down from 8.9990 percent and its accepted amount was Rs 12.757 billion. An amount of Rs 2.34 billion was borrowed through the auction for 10-year long-term papers and its cut-off yield fixed at 9.4007 percent.
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