KARACHI: The State Bank of Pakistan (SBP) on Monday said the first auction of Pakistan Investment Bonds (PIBs) following an increase in the interest rate saw a jump in rates as cut-off yields were raised by up to 246 basis points.

The government raised Rs117 billion against the target of Rs100bn in the auction held after the change in the monetary policy. The investors’ bids were Rs288bn indicating the rush for higher yielding PIBs.

The SBP recently increa­sed the policy interest by 150 basis points to 8.75 per cent. The sudden increase was widely criticised by independent economists and analysts and the decision was assumed as the outcome of the agreement with the Inter­national Monetary Fund (IMF). The government recently completed its staff level negotiations with the IMF for the resumption of loans. The cut-off yield for three-years PIBs was increased by 246 basis points to 11.34pc while the government raised Rs25 bn.

The cut-off yield on five-year PIBs was increased by 241 basis points to 11.59pc, with the government managing to raise Rs56.45bn.

The cut-off yield on 10-year PIBs was increased by 196 basis points to 11.79pc and Rs35.5bn was raised by the government. Bids for 15-years PIBs were rejected while no bids received for 20 and 30-year PIBs.

The SBP on Monday further clarified its stance on the monetary policy decisions and said that in the midst of a once-in-a-century pandemic, it would be imprudent to solely superimpose classical economic theories onto data outturns.

“Policymakers, economists and businesses around the world did not know how the global or domestic economy would evolve in response to mobility restrictions of varying stringencies in different locations,” the central bank said.

Published in Dawn, November 30th, 2021