Qudsia Bano

In a remarkable financial feat, the State Bank of Pakistan (SBP) has surpassed its target by successfully selling Rs 293.638 billion worth of Pakistan Investment Bond – Floating Rate (PIB-PFL) and Rs 184.66 billion in short-term Market Treasury Bills (MTBs). The SBP's initial targets were set at Rs 280 billion for PIB-PFL bonds and Rs 225 billion for MTBs. However, the actual sales surpassed these figures, signaling a positive response from the market and indicating a healthy appetite for government-issued bonds. The PIB-PFL auction, which attracted bids totaling Rs 703.092 billion, demonstrated an overwhelming demand for these bonds. The SBP accepted Rs 267.438 billion for the semi-annual bonds and Rs 26.2 billion for the quarterly bonds, underscoring investor interest across different maturity periods. Floating rate bonds offered in maturities of 2, 3, 5, and 10 years proved popular among investors.

These bonds are intricately linked to the policy rate of the SBP and provide semi-annual or quarterly payments to investors, making them an attractive investment option. In the auction, quarterly bonds were exclusively sold for the 3-year maturity, as the SBP rejected bids for the 2-year maturity. Meanwhile, semi-annual bonds found takers in both the 5-year and 10-year maturities. The cut-off price for the 3-year quarterly bond was determined at Rs 98.1357, while the cut-off prices for the 5-year and 10-year semi-annual bonds stood at Rs 96.5915 and Rs 94.8122, respectively. Notably, these cut-off prices reflect a slight decrease in bond yields compared to the previous auction held on January 10, where the SBP sold Rs 173.8 billion worth of PIB-PFL. Talking to WealthPK, Shahid Javed, Senior Economist at the State Bank of Pakistan, said that the SBP's ability to surpass its fundraising targets and the sustained demand for government bonds signify a positive economic outlook and investor confidence in Pakistan's financial markets.

This success is expected to further strengthen the country's fiscal position and contribute to overall economic stability, he added. "The substantial oversubscription in the PIB-PFL auction, with bids reaching Rs 703.092 billion, signals a robust demand for government securities, reflecting investor confidence in the nation's economic trajectory. This success can be attributed to the appeal of floating rate bonds with varying maturities, providing investors with flexibility and semi-annual or quarterly payments," he said. "The slight decrease in bond yields, as indicated by the cut-off prices, showcases the effectiveness of the SBP's monetary policies," he concluded.

Credit: INP-WealthPk