KARACHI: The government raised Rs62.9 billion through the auction of fixed-rate Pakistan Investment Bonds (PIBs) on Wednesday, while the yield on short-duration paper went up.
Amount that was raised was lower than the pre-auction target of Rs100 billion. Cut-off yield on three-year PIB increased by 100 basis points to 19.3895 percent. The bids for five-year and 10 years were rejected by the government, while no bids were received for 15, 20, and 30 years papers, according to the SBP’s auction result.
According to analysts, the result of Wednesday’s PIBs auction shows that the market is still hesitant to place a long-term bet on interest rates. The market’s changed expectations for the monetary policy to be unveiled on June 12 are reflected in the rise in shorter-term yields.
“Whilst inflation is still raging on, Fed and ECB’s increase in interest rates by another 25bps, have put the MPC (monetary policy committee) under renewed pressure to hike. Media reports suggest this is also what the IMF wants,” Tresmark said.
However, many analysts do not agree with the in-theory approach of interest rate supercycles to combat inflation in Pakistan’s case. Pakistan’s economy, being largely cash driven, limits the impact of monetary policy intervention, and prefers government taking alternative administrative measures. The CPI inflation rose to a record high of 36.4 percent in April from 35.4 percent in the previous month. The increase in inflation was due to higher food inflation amid currency devaluation.
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