The federal government borrowed on Wednesday more than Rs56.1 billion by auctioning Pakistan Investment Bonds (PIBs), data released by the State Bank of Pakistan shows.
The amount raised through the current fiscal year’s first auction of long-term papers was significantly less than the actual target of Rs100 billion.
PIBs of three-, five-, 10-, and 20-year maturity attracted bids worth Rs76.9 billion with a total realised amount of Rs74.2 billion.
Out of the total received bids, the federal government accepted bids amounting to Rs58.2 billion with the total realised amount of Rs56.1 billion.
The cut-off yield for three-year PIBs, which raised a realised amount of Rs32.2 billion, clocked up at 12.3%.
A realised amount of over Rs9.9 billion was raised from the five-year PIBs at the cut-off yield of 12.8%. The cut-off yield for 10-year papers remained 13.2% with the realised amount of Rs11.8 billion. As for the 20-year PIBs, more than Rs2 billion was realised at the cut-off yield of 13.1%.
According to the SBP’s auction calendar, the government expects to raise Rs300 billion through the sale of three-, five-, 10-, and 20-year PIBs during the first quarter of 2014-15. Bids for PIBs worth Rs1.8 billion were accepted in the last fiscal year.
Speaking to The Express Tribune, Topline Securities Senior Research Analyst Zeeshan Afzal said the participation in the auction remained subdued mainly because of a liquidity shortage in the market.
Indeed, the SBP conducted its open market operation (injection) on July 11. The amount accepted was Rs106.3 billion with a tenor of seven days. This meant participants had to return the money on Wednesday, thus reducing the overall liquidity in the debt market, Afzal said.
Secondly, he said the market participants remained cautious in the PIB auction in view of the upcoming monetary policy decision due on July 19 (Saturday).
The government has recently shifted the focus of its debt profile away from short-term treasury bills and towards long-term PIBs mainly to minimise rollover and refinancing risks.
Published in The Express Tribune, July 17th, 2014.
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Oh My GOD !! May ALLAH bless our future generations. We are creating huge COSTLY debt for our future generations. Half of this debt will be spent on Corruption and not achieve desired objectives. Who will pay back this Debt...Where are we heading for,,,,Businessman PM...please listen..there will nobody to write off these debts...like you got it written off for the Ittefaq group....Hoosh kay Nakhoon low...