The government raised Rs. 84.301 billion through an auction of fixed-rate Pakistan Investment Bonds (PIBs).
The issued bonds have yields increasing on shorter and longer tenors, and the target set for the auction was Rs. 125 billion, according to the documents released by the State Bank of Pakistan (SBP).
The cut-off yield for the three-year paper increased by 42 basis points (bps) to 9.4100, and the central bank sold Rs. 28.8 billion worth of this paper.
The yield on the five-year PIBs also increased by 31 bps to 9.9000 percent from 9.5890 percent in the previous auction held on 3 February. The SBP sold Rs. 35.6 billion worth of five-year PIBs.
The yield on the 10-year paper rose by 24 bps to 10.2890 percent, and Rs. 20 billion worth of these PIBs were sold.
However, bids of 15 years, 20 years, and 30-year PIBs were rejected by the government.
The Consumer Price Index (CPI) based inflation increased to 8.7 percent in February from 5.7 percent in January, and analysts said that even though the government was absorbing most of the impact of the rising prices of prices, it would ultimately have to be passed on.
This will be done partially through the rising utility prices which could elevate the general price level in the coming months. However, although the interest rates were expected to remain stable in the near-term, now the rates also seem to be poised to go up from July this year.
The SBP had kept the policy rate steady at 7.0 percent in January. It expects inflation to fall within the previously announced range of seven percent to nine percent for the FY 2021 and trend toward the five to seven percent target range over the medium-term.