KARACHI. The gover­nment on Wednesday rai­sed Rs421 billion through the auction of Pakistan Investment Bonds (PIBs) against the total bids of Rs1.5 trillion.

The auction of long-term bonds reflected the government’s strategy to avoid short-term debt servicing, which creates fiscal imbalances each year.

The auction was also crucial because the government exceeded the Rs350bn target while it remained restricted in last week’s auction of short-term treasury bills.

The government cut the cut-off yields by 19 to 61 basis points for different PIB tenors, indicating pressure on the SBP to cut its policy rate in the upcoming monetary policy. The bidding pattern showed that the investors were eager to park their liquidity even for the 15-year bonds, but the government did not raise any amount for this tenor. However, it received the highest Rs716bn bids for two-year PIBs, followed by Rs400.5bn, Rs378.4bn and Rs56.2bn for three-, five- and 10-year bonds, respectively.

The government raised Rs338.857bn in the auction, Rs45.854bn through non-bidding and Rs36bn via short-selling, making the total Rs420.7bn.

The cut-off yields for 2, 3, 5 and 10-year PIBs were 11.94per cent, 11.84pc, 12.38pc and 12.79pc, respectively. The government raised Rs143.12bn for two-year tenor, Rs75bn for three-, Rs107bn for five- and Rs13.7bn for 10-year bonds.

The SBP’s data showed that long-term PIBs’ contribution to the central government’s debt has increased compared to the short-term treasury bills. After the fall of the interest rate to 13pc, raising debts for the long term would benefit the government.

Published in Dawn, January 16th, 2025