Govt Rejects All Bids for Rs. 100 Billion Fixed Rate PIBs

The government rejected all the bids for fixed-rate Pakistan Investment Bonds (PIBs) against a target of Rs. 100 billion at the secondary market auction held on Wednesday as investors sought higher returns.

According to the data released by the State Bank of Pakistan (SBP), the government rejected all bids for the three-year, five-year, and 10-year instruments, while it did not receive any bids for the 15-year, 20-year, and 30-year papers.

This is the second time since December 2022 that SBP has failed to attract bids to complement its domestic debt-raising targets.

Markets carried forward January’s negative sentiment that had gained traction since the SBP raised its policy rate to 17 percent. The central bank rejected the bids because it wants to decrease the current high rates being offered on PIBs, while investors refused to make competitive bids as the prospectus yields didn’t win them over.

Returns on secondary market instruments may become even less favorable than they were yesterday, as the central bank struggles to combat inflationary shocks and liquidity shortages that are currently engulfing the economy.

To some extent, the SBP’s hardline stance may reflect implicit IMF pressure to keep raising more money for domestic operations, as well as a proactive move to guard against currency pressures as forex reserves continue to exhibit seesaw trends.

Forecasts indicate that the SBP will remain behind the curve if policy orthodoxy against inflation persists, and returns on PIBs and similar offerings fall even further.

Wednesday’s bond auction has further dented the central bank’s plans for raising over Rs. 5 trillion by the end of this month. With two null auctions in the bag during December-February, SBP still has to raise Rs. 1.195 trillion through PIBs and Islamic bonds or it will fail to achieve its debt-raising target.