The State Bank of Pakistan (SBP) on Wednesday sold Rs 293.638 billion worth of Pakistan Investment Bond – Floating Rate (PIB-PFL), and Rs 184.66 billion worth of short-term Market Treasury Bills (MTBs).
The SBP exceeded its targeted funds of Rs 280 billion for PIB-PFL bonds and Rs 225 billion for MTBs.
PIB-PFL auction attracted bids worth Rs 703.092 billion, indicating a strong demand for the bonds. The SBP accepted Rs267.438 billion for the semiannual bonds and Rs26.2 billion for the quarterly bonds.
Floating rate bonds have varying maturities of 2, 3, 5 and 10 years. They are linked to the policy rate of the SBP and offer semiannual or quarterly payments to investors.
The quarterly bonds were only sold for the 3-year maturity, as the SBP rejected the bids for the 2-year maturity. The semiannual bonds were sold for both the 5-year and 10-year maturities.
The cut-off price for the 3-year quarterly bond was Rs98.1357, while the cut-off prices for the 5-year and 10-year semiannual bonds were Rs96.5915 and Rs94.8122 respectively.
The cut-off prices reflect a slight decrease in the yields of the bonds, compared to the previous auction held on January 10, when the SBP sold Rs173.8 billion worth of PIB-PFL.
Yields drop on MTBs
On the other hand, the SBP also sold short-term treasury bills, also known as Market Treasury Bills (MTBs), worth Rs 184.66 billion, exceeding its target of Rs 225 billion.
But, the auction saw a sharp fall in the cut-off yields of the MTBs, which indicate the interest rate that the SBP pays to the investors. The cut-off yields for 3, 6, and 12 months were 20.4997%, 20.4000%, and 20.2298%, respectively, showing a decrease of 50 bps, 56 bps, and 62 bps from the previous auction.
The auction received bids worth Rs 1.121 trillion, out of which the SBP accepted Rs 185 billion. The bid-to-cover ratio, which measures the demand for the MTBs, dropped to 6.07 from 9.73 in the last auction.
The treasury bills have maturities of 3, 6, and 12 months. They are issued by the SBP to raise funds for the government and regulate the money supply.
The lower yields surprised some market analysts, who attributed them to the low uptake of the Sukuk bonds by the government in the previous day’s auction.
