KARACHI, Dec 21: The State Bank raised cut-off yields on Pakistan Investment Bonds (PIBs) of different tenures signaling that national saving schemes (NSS) rates may be revised upward.

The SBP increased the cut-off yield of 10.5270 per cent on the benchmark 10-year PIB against 10.4203 per cent set earlier.

For the first time the SBP sold PIB of 30 years maturity and set a cut-off yield of 11.7006 per cent and picked up Rs7.549 billion for the longest period bond.

The State Bank has been showing strong resentment regarding the heavy government borrowing for budgetary support through short-term Treasury bills and suggesting the government to diversify its borrowing. The re-selling of PIBs is a part of the government’s effort to use bonds for borrowing.

However, the amount raised through the PIBs, which totaled Rs18.673 billion, was not enough to fulfill the government’s requirement.

“The increase in the PIBs rates is not significant but it may be a catalyst for increase in the NSS rates, which the government is using to attract investment,” said an analyst.

In October, the government lifted ban on institutions to invest in national saving schemes in a bid to diversity its borrowings.

The vital decision was apparently taken as per the advice of the State Bank, which had asked the government to shed load on the SBP by reducing short-term T-bills borrowings.

However, the latest data issued by the SBP on Thursday showed that investment in NSS was gradually shrinking since the beginning of the fiscal 2006-07.

According to the data, NSS received a total investment of Rs6.010 billion in July, Rs3.556 billion in August, Rs2.696 billion in September and Rs1.775 billion in October.

It also showed that all known schemes under the NSS were facing outflow during these months and only the scheme with high returns like Behbood scheme was getting investment.

“This data shows that the NSS will not receive investment unless the rates are increased. The enhanced rates of PIBs could be taken as a sign that rates could be revised in January next year,” said the analyst.

The cut-off for the 20-year PIB was fixed at 11.4203 per cent, compared with 11.2500 per cent set earlier.

— For the 15-year PIB, the SBP set a cut-off yield of 11.1005 per cent and the same for the five-year set at 10.0017 per cent.

The rate on 3-year PIB was the only one, which saw a slight reduction to 9.7393 per cent compared to 9.8469pc set earlier.

— The SBP sold a total Rs18.67 billion worth of PIBs for the 6th tenors and received bids of Rs35.05 billion.

Banks have been criticizing the decision allowing institutions to invest in NSS. They were of the view that If the NSS rates were increased the flow of deposits towards the scheme would create liquidity crunch and the money would be costlier for the borrowers of the banks.