The government on Wednesday borrowed over Rs26.11 billion from investors in, according to analysts, still undeveloped bond market through auctioning Pakistan Investment Bonds (PIBs). The cash-strapped federal government is, reportedly, trying to raise some Rs200 billion through such risk-free PIB auctions to resolve the longstanding circular debt issue once and for all.
Wednesday saw the State Bank of Pakistan (SBP) auctioning of PIBs of 3-, 5-, 7-, 10-, 15-, 20- and 30-year maturity periods having respective coupon rates of 11.25, 11.50, 11.75, 12.00, 12.50, 13.00 and 13.75 per cent respectively. The settlement date for the new auction is September 15. In response to the central bank’s call for bidding, investors submitted bids worth Rs37.894 billion, but the regulator accepted bids having a face value of Rs26.119. Haunted, perhaps, by ongoing uncertainties in global financial markets, investors appeared reluctant to buy the long-term bonds and therefore did not bid for the bonds of 15-, 20- and 30-year maturity periods. They opted for relatively short-term government securities and invested Rs6.600 billion, Rs6.675 billion and Rs12.844 billion in government papers maturing in three, five and 10 years, respectively.
The bids for seven years’ maturities were rejected by the State Bank for reasons best known to it. The fresh borrowing would cost the government Rs234.080 million on account of interest that Islamabad would pay to lenders at a per annum weighted average yield of 13.1230, 13.1412 and 13.1926 per cent respectively for the three, five and 10 years’ PIBs. The cut-off price range for per Rs 100 bond was 95.32, 93.84 and 93.18. Local equity markets, specially the Islamabad Stock Exchange, witnessed bullish trends with the benchmark going up by 16.33 points to close at 2,446.07 on the back of what market observers viewed as rumours of generating of Rs200 billion by the government through auctioning the PIBs to resolve the lingering issue of circular debt.
