KARACHI, April 21: The State Bank set a cut-off yield of 10.1332 per cent on the benchmark 10-year investment bond at an auction on Saturday, down from 10.1988pc previously.

The central bank also set a cut-off yield of 10.9800pc on the 15-year Pakistan Investment Bond (PIB), marginally lower than 10.9815pc set in the last auction on March 5.

“The cut-off yields were very close to the levels at which the bonds have been trading in the secondary market in recent days,” said a dealer at a local bank.

Dealers said the secondary market yields had eased slightly since the last auction due to increased corporate demand for long-term papers.

For the five and three-year bonds, the cut-off yield was set at 9.6197 and 9.3315 per cent respectively.

In the last auction, the cut-off yields on the five- and three-year PIBs were set at 9.7652 and 9.3690 per cent respectively.

The central bank also set cut-off yields of 11.1999 and 11.5906 per cent for the 20- and 30-year PIBs. It had rejected all bids for these two papers in the last auction.

The central bank said it sold a total of Rs15.51 billion worth of PIBs, after receiving bids worth about Rs49.6 billion. It had set a combined pre-auction target of Rs15 billion.

Settlement of the auction will be on Monday.

“The heavy participation is due to the awareness among corporates, both state-owned and non-state owned, regarding diversification of their liquid funds in long-term, risk-free government papers,” said Zafar Shaikh, additional director general at the Finance Ministry’s debt office in Islamabad.

This was the fourth PIB auction to be conducted by the government in the 2006-07 fiscal year, which began on July 1, and officials say that the government will continue to hold regular auctions to support the domestic debt market.

The three-, five-, 10-, 15- and 20-year PIBs carry annual coupons of 9.1, 9.3, 9.6, 10 and 10.5 per cent respectively, while the 30-year paper carries a coupon of 11 per cent.—Reuters