Govt secures Rs350 billion through PIB auction as bond yields hit 20-month low  

The government raised Rs350 billion in a Pakistan Investment Bonds (PIBs) auction, surpassing the Rs300 billion target, as yields on five-year and 10-year bonds declined to their lowest levels since March 2022.  

According to Arif Habib Limited, the auction drew bids worth Rs893 billion, yielding a bid-cover ratio of 3.0x. The cut-off yield for the two-year zero-coupon bond dropped by 19 basis points (bps) to 13.05%, while the three-year bond yield remained steady at 12.5%.  

The yields for five-year and 10-year bonds also fell, decreasing by 9bps and 14bps to 12.7% and 12.838%, respectively.  

A report by Topline Securities forecast Pakistan’s Consumer Price Index (CPI) for November to stand between 4.5% and 5% year-on-year (YoY), bringing the five-month FY25 average inflation to 7.91%, a significant drop compared to 28.62% in the same period last year.  

The report noted that October’s headline inflation was recorded at 7.2%, slightly higher than September’s 6.9%. With inflation expectations for November at 4.5-5%, real interest rates could rise to 1000-1050bps, well above Pakistan’s historic average of 200-300bps.  

Topline projected the interest rate to settle between 11% and 12% by December 2025, ensuring positive real rates of 200-300bps based on an anticipated FY26 inflation average of 8.8%. Inflation for FY25 is expected to range between 7% and 8%.  

The State Bank of Pakistan (SBP) has cut its key interest rate for the fourth consecutive time this month, reducing it by 250bps to 15%. Since June, the central bank has lowered the policy rate by 700bps across four successive reductions.