As a result of the State Bank of Pakistan’s recent monetary policy decision for an interest hike, cut-off yields on the first auction of Pakistan Investment Bonds (PIBs) have soared by 246 basis points.
In the auction held after the monetary policy adjustment, the government raised Rs. 117 billion against a target of Rs. 100 billion. The bids totaled Rs. 288 billion, showing a rush for higher-yielding PIBs.
A revised breakdown of the updated rates at which bids are accepted reveals that the government raised Rs. 25 billion by hiking the cut-off yield for three-year PIBs by 246 basis points to 11.34 percent. Furthermore, it managed to raise Rs. 56.45 billion by elevating the cut-off yield on five-year PIBs by 241 basis points to 11.59 percent.
The government raised Rs. 35.5 billion by raising cut-off yields on 10-year PIBs by 196 basis points to 11.79 percent. Bids for 15-year PIBs were rejected, while bids for 20 and 30-year PIBs were not received.
The hike in PIBs basis points comes on the back of the Central Bank’s decision to increase policy interest by 150 basis points to 8.75 percent. The sudden increase was widely criticized by independent economists and analysts, and the decision was assumed as the outcome of the agreement with the International Monetary Fund (IMF).
It bears mentioning that the government recently completed its staff-level negotiations with the IMF for the resumption of loans, a move that has begun to spell recurrent price shifts as the economy navigates towards a feeler for stability.