Pakistan Investment Bonds attract $12.7m after hike in yields

Published March 9, 2021
The government has been accumulating long-term borrowing through PIBs and increased the cut-off yields by up to 42 basis points on Feb 27. — AFP/File
The government has been accumulating long-term borrowing through PIBs and increased the cut-off yields by up to 42 basis points on Feb 27. — AFP/File

KARACHI: After a recent increase in the cut-off yields, the Pakistan Investment Bonds (PIBs) attracted over $12.7 million foreign investment in the first week of this month helping the country’s external account to improve its reserves, data issued by the State Bank on Monday showed.

The government has been accumulating long-term borrowing through PIBs and increased the cut-off yields by up to 42 basis points on Feb 27.

The cut-off yield rose to 9.41 per cent for three-year PIBs, 9.9pc for five-year and 10.05pc for 10-year bonds.

For the first time since the Covid-19 pandemic outbreak in March 2020, foreign investments in domestic bonds crossed the cumulative figure of $150m.

However, this time the outflow from PIBs is almost negligible as it was just $0.3m during the current fiscal year. The inflow in PIBs started in November 2020 and has been growing. The latest increase in the PIBs rates increased the real interest rate, making the investment more attractive.

The SBP data shows that entire amount of $12.7m invested in PIBs came from the United States. The Fed Reserve’s interest rate is at the lowest level of 0.25 per cent which could be one of the reasons for higher investment from the US. Out of total inflows of $150.3m in PIBs, around $104m investments came from the States.

The foreign inflow in treasury bills still continued but the outflow is higher. During the current fiscal year, total inflows in treasury bills were $424.2m while the outflows were $628.2m.

Before the pandemic, total inflows – mostly in T-bills – were $3.5bn. However, within a few months most of the investments returned to their origin.

The foreign inflows in the equity market still continue but the outflows are also higher. During the current fiscal year, inflows in the equity market were $398.2m against the outflows of $711.5m, reflecting low confidence in the fluctuating equity market.

Bankers said the inflow through PIBs was encouraging though it may create problems for the next government when the bonds mature.

Pakistan has remained a high-inflation economy which offers higher interest rate and investors, usually banks, are earning most of their profits from government papers.

Banks and other investors have collectively invested more than $14 trillion in the PIBs. However, no data is available that could show which tenure attracted most of the investments. Bankers noted that the three-year PIBs with 9.4pc returns have become very attractive for foreign investors.

Published in Dawn, March 9th, 2021

Opinion

Karachi development
Updated 13 Apr 2021

Karachi development

Our planners must learn that infrastructure and services are essential to economic progress.
The government’s emerging traits
Updated 12 Apr 2021

The government’s emerging traits

Frequent bureaucratic changes signify a whimsical way of governing and reflect knee-jerk reactions to the criticism of the day.

Editorial

Reform after Daska
Updated 13 Apr 2021

Reform after Daska

Electoral malpractice generates instability and delegitimises the mandate of the winner, triggering one crisis after another.
13 Apr 2021

Reinstating LGs

THE PTI government in Punjab is sending confused and conflicting signals to people when it comes to the critical...
13 Apr 2021

Remembering I.A. Rehman

THE quest for a progressive society in Pakistan, at peace with itself and its neighbours, suffered a big setback in...
Pakistan-India peace
Updated 12 Apr 2021

Pakistan-India peace

Experts note that everything — including Kashmir — can be resolved if there is a will in both capitals.
12 Apr 2021

Child abuse

IN its annual report, the NGO Sahil found that there has been a 4pc increase in documented cases of major crimes...
12 Apr 2021

New tax chief’s task

THE FBR got a new chairman on Friday. Asim Ahmed, a senior IRS officer who was serving as the Board’s IT member...