Govt raises Rs350bn via PIB auction, yields on 5-year, 10-year bonds lowest since March 2022

KARACHI: The government raised Rs350 billion through the auction of Pakistan Investment Bonds (PIBs), exceeding the target of Rs300 billion, with yields on five-year and 10-year papers falling to their lowest levels since March 2022.

“The central bank received bids amounting to Rs893 billion, against a target of Rs300 billion, resulting in a bid-cover ratio of 3.0x,” said Arif Habib Limited in a note.

The cut-off yield for the two-year zero-coupon bond decreased by 19 basis points (bps) to 13.05 percent. Meanwhile, the cut-off yield for the three-year bond remained unchanged at 12.5 per cent.

The yields for the five-year and ten-year bonds also fell, decreasing by 9bps and 14bps, respectively, settling at 12.7 per cent and 12.838 per cent.

According to Topline Securities report, Pakistan’s Consumer Price Index (CPI) for November is expected to clock in at 4.5-5 per cent year-on-year (YoY) taking five-month FY25 average to 7.91 per cent, compared with 28.62 per cent in the same period last year.

The headline inflation stood at 7.2 in October, compared with 6.9 per cent in the previous month.

“With inflation expectations of 4.5-5.0 per cent for November, real rates will surge to 1000-1050bps, significantly higher than Pakistan’s historic average of 200-300bps,” the report said.

“We expect interest rate to clock in at 11-12 per cent by December 2025, suggesting positive real rates of 200-300bps based on FY26 inflation average of 8.8 per cent. For FY25, we expect inflation to clock in at 7-8 per cent,” it said.

The State Bank of Pakistan (SBP) cut its key interest rate for the fourth consecutive this month, lowering it by 250bps to 15 per cent. Since June, the SBP has lowered interest rates by 700bps over four straight cuts.