The government raised Rs299 billion from the auction of fixed-rate Pakistan Investment Bonds (PIBs) on Wednesday, though the amount fell short of the pre-auction target of Rs350 billion.Â
The auction saw a slight decrease in yields across all tenors, following a recent interest rate cut by the State Bank of Pakistan (SBP).
The results, as disclosed by the SBP, showed that the cut-off yield for the two-year PIB dropped by 15 basis points to 11.79%. The yield on the three-year bond also fell by 19 basis points to 11.69%, while the five-year bond’s yield decreased by 20 basis points to 12.14%.Â
Similarly, the yield on the 10-year bond saw a 20bps decline, reaching 12.589%. However, bids for the 15-year paper were rejected.
This auction follows the SBP’s decision on Monday to cut its benchmark interest rate by 100bps, bringing it to 11%. This marks the latest in a series of rate cuts that have reduced the policy rate from a high of 22% after a brief hold in March. The current rate is the lowest it has been in three years, contributing to a cumulative reduction of 11 percentage points since June 2024.
The SBP’s monetary policy statement attributed the recent drop in inflation as a key factor in its decision, noting a significant decrease in inflation between March and April.Â
Headline inflation eased to 0.3% in April, down from 0.7% in March, while core inflation, which had remained around 9%, slowed to 8%. This decline was mainly driven by lower energy and food prices, as well as a favorable base effect amid moderate demand conditions.
