The unexpected drastic cut in the cut-off yield on the Pakistan Investment Bonds surprised the market while the State Bank raised more than the target set for the entire quarter, from November to January.
It was an unusual day for the bonds market as they were expecting a cut in the PIBs rate after the discount rate was reduced by 50 basis points to 9.5 per cent on Nov 15. The cut-off yield on three-year PIBs was, however, slashed by 1.59pc to 10.89pc, for five-year PIBs by 1.87pc to 11.10pc and for 10-year by 1.45pc to 11.99pc.
The rates were not slashed at this level for several years, said the market dealers.
The State Bank kept the policy interest rate unchanged for almost a year which supported the PIBs to remain attractive with high rates not available anywhere in the market.
The government made the PIBs main instrument to raise money which benefited banks but deprived the private sector of banking money.
