The cut-off yield on Pakistan Investment Bonds (PIBs) declined up to 18 basis points (bps) in the auction held Wednesday, indicating another rate cut in upcoming monetary policy. According to SBP, the auction for the sale of long-term government securities of 3-, 5-, 10-, and 20-year maturity was held on November 18, 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 further reduction in the key policy rate in future on lower inflation outlook. Overall, bids amounting to Rs 103.712 billion or total realised amount of Rs 109 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 68.44 billion were received for 3-year, Rs 30.22 billion for 5-year and Rs 5.05 billion for 10-year bond.
Overall, bids amounting to Rs 46.68 billion (or Rs 49.134 billion total realised amount) were accepted for 3-, 5- and 10-year long-term government securities. The borrowed amount is equal to the target of Rs 50 billion set by the federal government for this auction.
The cut-off yield of 3-year PIBs declined 17 basis points to stand at 7.0270 percent with an accepted amount of Rs 39.48 billion (total realised amount). With 18 bps decline, the cut-off yield of 5-year PIBs was set at 7.999 percent down from 8.1805 percent on borrowing of Rs 9.4 billion. The government borrowed Rs 210 million through the auction for 10-year long-term papers and its cut-off yield was fixed at 9.1507, down 8 bps. Analysts said the decline in the long-term government securities indicates another rate cut in the upcoming monetary policy to be announced on Saturday.
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