There is no doubt that some positive indicators - like reduction in the import bill and growth in foreign remittances - were pointing towards the possibility of strengthening the economy before the end of the current fiscal year.
But lately, higher-than-expected inflation, continuing fiscal deficit pressures, and falling foreign investments, and as a consequence, the maintenance of status quo in central banks policy rate for the third time this year have increased ambiguity as to which direction will the interest rate move.
In order to solve this interest-rate-movement-riddle, market pundits were then keeping a close eye on governments PIB auction conducted last week.
And when the government rejected the bids for relatively longer tenure bonds, 20-year and 30-year papers, for the second consecutive time, it caught the attention of market participants.
Though, few specialists cite any particular reason for rejection, some believe that in times of high interest rate, raising money through ten or less-than-ten year tenures is less costly for the government than raising funds through higher tenures.
Moreover, the government requires relatively lower tenure borrowing at this point of time to meet its current expenditure requirements and to facilitate project financing. While this may be a plausible reason, others offer a different rationale.
"As 20 and 30-year papers are usually purchased by commercial bank rather than corporations, the government avoided these tenures to leave funds in the credit pie for the general public", said one fixed income dealer.
While predicting interest rates, a number of participants view the governments move as an indication that interest rates will go down in medium term and government is apparently avoiding to lock in loans at high interest rate.
In sharp contrast, others believe that amid inflation, which is likely to rise after implementation of VAT and the continuing withdrawal of subsidies, interest rates are likely to remain sticky for a while, possibly even increase sometime later this year, before they start going down.
Pricing-in these concerns, the secondary market yields of benchmark PIB have quite rightly been rising - now standing at 12.64 percent from 12.50 percent at the start of this month. Clearly, the market isn buying the idea of a rate cut, as indicated by the governments PIB action last week.