KARACHI: All bids for Pakistan Investment Bonds (PIBs) were rejected on Wednesday as investors asked for higher returns.

The government did not show interest as it has already offloaded a major chunk of long-term, costly PIBs during the first two months of the current fiscal year.

Investors said banks are not interested in long-term investment because the trading of PIBs in the secondary market is not attractive.

“The margin of profit in the secondary market for PIBs has dropped sharply while investors holding a large chunk of PIBs are feeling stuck,” said the director of an investment company.

Investors said the banks did not show any interest in long-term PIBs. Their bids for three-year PIBs amounted to Rs63 billion while they were Rs10bn and Rs2bn for five-year and 10-year PIBs, respectively.

Banks are cautious about the inflation pattern that may push up the interest rate in coming months. They have been piling bonds as the best instrument with a risk-free high yield.

However, with falling inflation, returns on PIBs came down drastically, impacting the banks’ profitability.

Published in Dawn, October 20th, 2016