Govt bond sale nets Rs83bn, missing target

The government’s attempt to raise funds through the sale of fixed-rate Pakistan Investment Bonds fell short of its target, securing Rs83 billion instead of the aimed Rs125 billion.

Investors displayed caution amidst uncertainties surrounding inflation and gas prices.

According to data from the central bank, the government sold three-, five-, and 10-year bonds with yields largely unchanged from the previous auction in January.

The cut-off yield on the five-year bond experienced a slight increase of 5 basis points to 15.5499 percent, while yields on the three- and 10-year bonds remained steady at 16.7999 percent and 14.500 percent, respectively.

Notably, bids were absent for the 15-, 20-, and 30-year bonds, indicating the market’s reluctance to commit funds for longer durations due to unclear inflation projections and anticipated gas price hikes.

Analysts attribute the auction results to the government’s hesitancy in generating funds at higher rates, despite the necessity to cover the budget deficit. Market participants await clarity on the potential gas price revision and its impact on inflation.

Reports suggest that the Economic Coordination Committee is poised to review gas prices, subject to approval by the federal cabinet, followed by notification from the Oil and Gas Regulatory Authority (OGRA).

Considering the weightage of gas prices in the national consumer price index basket, analysts estimate a potential 10.6 percent increase in gas prices across all income quintiles, leading to an inflationary surge of approximately 43 basis points.

Factoring in these effects, analysts anticipate the Consumer Price Index for FY24 to reach 24.91 percent year-on-year.

Monetary policy easing is expected to commence in March, with the State Bank of Pakistan maintaining the policy rate at 22 percent last month.

This decision was influenced by the moderation in the anticipated decline in inflation, attributed to frequent adjustments in administered energy prices.