The government successfully raised Rs454 billion through the auction of fixed-rate Pakistan Investment Bonds (PIBs), exceeding its initial target of Rs350 billion.
The auction saw a decline in yields across most tenors, indicating market expectations of a moderate interest rate cut in the upcoming monetary policy meeting.
According to auction results, the cut-off yield for two-year PIBs declined by 25 basis points (bps) to 11.69 percent. The three-year bond yield remained unchanged at 11.889 percent, while the five-year and 10-year bonds saw marginal declines of 1bps each, settling at 12.389 percent and 12.79 percent, respectively.
Financial analysts interpreted the slight drop in yields as an indication that the State Bank of Pakistan (SBP) is likely to proceed with a measured reduction in interest rates during its next policy meeting scheduled for March 10.
The central bank had previously cut its key interest rate by 100 bps to 12 percent in response to easing inflationary pressures.
Pakistan’s inflation rate has been on a downward trajectory, hitting a nine-year low of 2.4 percent year-on-year in January, compared to 4.1 percent in December. Analysts anticipate that inflation may decline further, potentially falling below 2.0 percent in February.
The ongoing slowdown in inflation is expected to shape future monetary policy decisions, with financial markets closely monitoring the SBP’s approach to rate adjustments.
