Govt rejects high-yield bids, SBP raises Rs512 billion in separate PIB auction

Pakistan’s debt market saw mixed outcomes on Tuesday, as the government rejected all bids for fixed-rate Pakistan Investment Bonds (PIBs) and Shariah-compliant sukuk in one set of auctions, while the State Bank of Pakistan raised over Rs512 billion through a separate PIB auction, reflecting strong participation from investors adjusting to higher interest rates.

The divergent outcomes come a day after the SBP increased its policy rate by 100 basis points to 11.5 per cent, amid inflation concerns linked to global commodity prices and geopolitical tensions.

In the first set of auctions, the government declined all bids for fixed-rate PIBs as well as Ijarah and hybrid sukuk, despite strong participation. Total bids reached around Rs906 billion against a target of Rs300 billion, but authorities chose not to accept any offers, citing elevated yield expectations from investors.

Market participants indicated that bids were approaching 13%, reflecting expectations of further monetary tightening and heightened geopolitical uncertainty. Officials said the decision aimed to avoid locking in borrowing at higher costs and to prevent signalling urgency for funds.

Analysts said the rejection highlighted a gap between investor expectations and the government’s pricing stance. Investors were seeking additional premium over already elevated secondary market yields, while authorities resisted repricing at those levels.

SBP raises Rs512 billion through PIB auction

In a separate auction, the SBP accepted bids and raised Rs499.4 billion in face value, with the total realised amount reaching Rs512.5 billion, including accrued interest.

The auction attracted bids worth Rs906.4 billion across multiple tenors, including two-year zero-coupon, three-year, five-year, 10-year and 15-year instruments.

Participation was concentrated in medium- to long-term tenors, particularly five-year and 10-year PIBs. The five-year paper alone drew bids exceeding Rs425 billion, while demand for the 10-year tenor crossed Rs162 billion.

Shorter tenors such as two-year and three-year papers saw relatively lower interest, indicating that investors were positioning for shifts in the interest rate cycle and seeking to lock in yields over a longer horizon.