The pre-auction target had been set at Rs30 billion, against which the central bank received bids worth Rs71.284 billion. However closer scrutiny reveals a persistent skew in favour of shorter tenure government paper.
The central bank received a whopping Rs36.85 billion in bids for three-year PIBs against a relatively modest pre-auction target of Rs8 billion. By comparison, the bids received for 10-year PIBs stood at Rs14.2 billion, relatively comparable to the pre-auction target of Rs10 billion.
The 20-year PIBs are yet to stoke the interest of investors and demand for these long-term government bonds remained absent in the latest auction, just as it has been over previous rounds, despite a target of Rs4 billion.
SBP eventually accepted bids worth Rs25.384 billion, an amount below its own target. But once again, the acceptance of bids also follows a similar pattern as highlighted above. The central bank accepted bids worth Rs16.5 billion for three-year PIBs; while bids worth just Rs4.084 billion and Rs4.8 billion were accepted for five-year and 10-year PIBs, respectively.
In a nutshell, while SBP accepted more than twice the amount it had targeted prior to the auction in three-year PIBs, its acceptance of both five-year and 10-year PIBs remained significantly below the respective pre-auction targets.
Cut-off yields continued to slide in the latest auction, albeit at a slower pace compared to the previous two auctions (August 15 and September 26).
The cut-off yield on three-year PIBs dropped by 23.17 bps to 10.3935 percent in the latest auction, while the same for five-year and 10-year PIBs shed 21.81 bps and 15.01 bps, to settle at 10.9563 percent and 11.4495 percent, respectively.
The absence of activity in long-term government paper means there are no real benchmarks for other lending on long-term basis. As a result, home loans and long-term project finance through the domestic financial institutions remain a distant dream.
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