The cut-off yield on long-term government securities declined up to 16 basis points (bps) in the auction held Wednesday. This was the first auction for Pakistan Investment Bonds (PIBs) after reduction in key policy rate. The State Bank of Pakistan (SBP) had cut key interest rate by 25 bps in the monetary policy announced on May 21, 2016.
Banks aggressively participated in the auction of PIBs for 3-, 5-, 10- and 20- year maturity held on June 15, 2016. In response to the tender, the SBP received bids amounting to Rs 219.992 billion (Rs 227.916 billion realised value) for the sale of 3-, 5- and 10-year long-term investment bonds. However, no bid was received for 20-year PIBs.
Some Rs 112.975 billion bids were received for 3-year, Rs 67.4 billion for 5-year and Rs 39.617 billion for 10-year varieties. Overall, bids worth Rs 43.267 billion with a total realised value of Rs 44.753 billion were accepted against the target of Rs 50 billion set for this auction. A cut-off yield of 6.4068 percent, down 14 bps, was set for 3-year PIBs with accepted amount of Rs 31.022 billion (total realised value). Some Rs 8.899 billion were borrowed through 5-year long-term investment bond at a cut-off yield of 6.9092 percent compared to 6.9997 percent in the previous auction. In addition, the cut-off yield of 10-year bonds declined by 16 bps to 8.0197 percent and bids worth Rs 4.831 billion were accepted.