The cut-off yield on Pakistan Investment Bonds (PIBs) declined up to 15 basis points (bps) in the auction held Wednesday. According to SBP, the auction for the sale of long-term government securities of 3-, 5-, 10-, and 20-year maturity was held on October 7, 2015 with coupon rates of 8.75 percent, 9.25 percent, 9.75 percent and 10.75 percent respectively.
Banks aggressively participated as they are expecting a further reduction in the key policy rate in the future on lower inflation outlook. Overall, bids amounting to Rs 197 billion or total realised amount of Rs 204 billion were received for 3-, 5- and 10-year PIBs against the target of Rs 50 billion. However, no bid was received for 20-year PIBs as banks seemed reluctant to invest in long-term variety due to lower interest rate.
Bids amounting to some Rs 91 billion were received for 3-year, Rs 107 billion for 5-year and Rs 5.6 billion for 10-year bonds. Overall, bids amounting to Rs 97.950 billion (total realized amount) were accepted for 3-, 5- and 10-year long-term government securities. The borrowed amount is almost double than the target of Rs 50 billion set by the federal government for this auction.
The cut-off yield of 7.1987 percent, decline by 15 bps, was set for 3-year long-term bonds with accepted bids amounting to Rs 41.513 billion (total realized value). Some Rs 55.918 billion were borrowed through the auction for 5-year bond at a cut-off yield of 8.1805 percent down 15 bps. After a decline of 11 bps, the cut-off yield of 10-year long-term bonds was fixed at 9.2299 percent with accepted amount of Rs 517.748 million (total realized amount).
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