Sell-off: Federal govt borrows Rs83.6b by auctioning PIBs

Amount raised significantly less than the actual target of Rs100 billion.

Our Correspondent August 12, 2014

KARACHI: The federal government borrowed on Tuesday Rs83.68 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 second 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 Rs90.83 billion with a total realised amount of Rs87.53 billion.

Out of the total received bids, the federal government accepted bids amounting to Rs86.78 billion with the total realised amount of Rs83.68 billion.

The cut-off yield for three-year PIBs, which raised a realised amount of Rs39.3 billion, clocked up at 12.5%.

A realised amount of over Rs21.5 billion was raised from the sale of five-year PIBs at the cut-off yield of 12.9%. The cut-off yield for 10-year papers remained 13.3% with the realised amount of Rs22.8 billion. No bids were received for the 20-year PIBs. In the last auction held on July 16, 20-year PIBs had attracted a realised amount of more than Rs2 billion at the cut-off yield of 13.1%.

According to the SBP’s auction calendar published at the start of the fiscal year, the government was to raise Rs300 billion through the sale of three-, five-, 10-, and 20-year PIBs during the first quarter of 2013-14.

The federal government borrowed more than Rs56.1 billion through PIBs in the first auction of 2014-15. Like the latest auction, the amount raised during the first auction was significantly less than the actual target of Rs100 billion.

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. However, analysts believe the shift in its borrowing patterns has increased the cost of money for the government, as the cut-off yields on long-term papers are higher than treasury bills of shorter tenors.

Published in The Express Tribune, August 13th, 2014.

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