In a successful auction held recently, the State Bank of Pakistan (SBP) surpassed expectations by raising a staggering Rs496.37 billion through the sale of Pakistan Investment Bond – Floating Rate (PIB-FRR) semiannual and quarterly bonds. The auction included maturities of 2, 3, 5, and 10 years, significantly exceeding the initial target of Rs280 billion. The central bank witnessed robust investor interest, with bids totalling Rs946.57 billion for PIB-FRR semiannual and Rs231 billion for PIB-FRR quarterly. The SBP accepted bids amounting to Rs432.44 billion and Rs63.926 billion, respectively, indicating a high level of confidence in Pakistan's bond market. Among the notable results, the SBP secured Rs3 billion through the sale of 2-year bonds and Rs60.93 billion through the sale of 3-year quarterly PIB-FRR. The 5-year PIB-FRR semiannual bond saw substantial demand, raising Rs285.568 billion, while the 10-year semiannual bond generated Rs146.876 billion.

The cut-off prices for the auction varied, with the 2-year and 3-year PIB-FRR quarterly bonds settling at Rs99.0041 and Rs98.0138, respectively. For the PIB-FRR semiannual bonds, the cut-off was Rs96.9149 for the 5-year maturity and Rs94.3547 for the 10-year maturity. The total sum raised through competitive bids amounted to Rs408.479 billion, demonstrating the strong appetite among investors. Non-competitive bids contributed Rs23.965 billion to the overall amount, reflecting additional interest from participants. The settlement date for the successful bids was November 16, 2023, marking a swift execution process for the raised capital. In the previous auction held on November 1, the SBP had sold PIBs-FRR worth Rs341.276 billion for 2, 3, 5, and 10 years, surpassing the target of Rs280 billion.

Financial analysts view the oversubscription of the PIB-FRR bonds as a positive indicator of investor confidence in Pakistan's economic stability. In an interview with WealthPK, Shahid Javed, a senior economist at SBP, said that the substantial oversubscription, exceeding the set target, suggests a robust demand for government securities, highlighting the attractiveness of the Pakistani bond market. He anticipates that this successful auction will contribute to the government's financing needs and further strengthen the country's fiscal position. “Moreover, the competitive bids exceeding non-competitive bids signal active participation from institutional and individual investors alike. The diverse maturities offered in the auction showcase the flexibility of the PIB-FRR bonds, catering to a broad range of investor preferences.” The SBP economist believes that while global economic uncertainties persist, Pakistan's ability to attract significant investments through bond auctions reflects positively on the country's economic resilience. “The successful outcome of this auction is likely to bolster investor confidence, potentially attracting more participation in future government debt offerings.”

Credit: Independent News Pakistan (INP)