Govt raises cut-off yields on PIBs by up to 42bps.

KARACHI -- The government on Wednesday increaAsed the returns on the long-term Pakistan Investment Bonds (PIBs) up to 42 basis points despite no change in the policy interest rate. It raised Rs84.3 billion through action of PIBs (fixed rate).

Higher returns encourage the banks to increase their investment in the long-term government papers.

The government raised Rs28.75bn for three-year tenure against bids of Rs42.75bn. The cut-off yield for these PIBs was increased by 42 basis points, highest increase in the auction. The cut-off yield rose to 9.41 per cent compared to 8.99pc in the previous auction.

The government raised highest amount of Rs35.55bn for five-year PIBs at the return rate of 9.9pc. The rate was increased by 31 basis points compared to previous rate of the five-years PIBs.

For the benchmark 10-year PIBs, the government raised Rs20bn at the cut-off yield 10.289pc; an increase of 24 basis points. The cut-yield was 10.05pc in the previous auction.

Bankers said the cut-off yield was increased due to higher inflation which makes the returns negative or extremely low. The average CPI in the eight months - between July and FebAruary decreased from last year's 11.71pc to 8.25pc this year.

The month of February witnessed the inflation high as it edged up to 8.7pc from 5.7pc in January.

Banks are increasingly investing into PIBs which are risk-free and high-yielding. The total investment in PIBs is more than Rs14 trillion.

Experts beAAlieve that 10.28pc returns on 10-years PIBs is highly attAractive for foreign investors.

The present government has stopped borrowing from the State Bank as per the agreement with the...