The bonds market got signal for further cut in interest rate, as cut-off yield on Pakistan Investment Bonds (PIBs) was again slashed up to 31 basis points yesterday.
The State Bank reported that the yield on three-year bonds was cut by 30 basis points to 10.59 per cent, five-year bonds to 10.79pc by 31 basis points and 10-year PIBs to 11.70pc by 29 basis points.
The government raised more than the target set for the entire quarter in the auction while banks invested heavily in three-year papers.
The banks were eager to park maximum money for long-term bonds as they offered Rs337 billion in the auction.
The government raised Rs151.3bn through the auction while the target set for the entire quarter was Rs150bn.
Banks invested the highest amount in three-year PIBs worth Rs91bn while they offered highest amount of Rs157bn for it.
For five-year PIBs, Rs24bn and for one-year PIBs, Rs36bn were raised, respectively. Bonds are the prime priority for banks as they invest more than 82pc of their liquidity in government papers.
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The equity market on the first day of last week cheered State Bank of Pakistan’s 50 bps cut in discount rate to 9.5pc, leading to KSE-100 index crossing the psychological barrier of 32,000 on Tuesday. However with the SBP placing six-month moratorium on KASB Bank, SECP suspended trading activities of its brokerage subsidiary resulting in panic selling by some investors during mid-week. But attractive valuations brought back investors’ interest into the market on Friday (+256 points) despite the incumbent government gearing up to face a strong protest from a major political party on Nov 30. All in all, the benchmark index closed up 0.5pc WoW at 31,495 points, with average trading volumes edging down by 8.6pc WoW. Gas utilities outperformed the market during the week as ECC approved policy guidelines for OGRA to allow an average 30pc hike in gas tariff. Other key highlights of the week were: (1) 1QFY15 fiscal deficit clocking in at 1.2pc of GDP, (2) Current Account deficit in Oct-2014 widening to $347mn, (3) FDI rising by 47pc YoY in 4MFY15 and (4) Cotton arrivals rising by 10pc YoY to 10.44m bales in FY15.
The PIBs falling up to 44 bps in the auction.
State Bank of Pakistan (SBP) conducted the auction for Pakistan Investment Bonds for 3-, 5-, 10-, and 20-year maturity on April 22, 2015 with coupon rates at 8.75 percent, 9.25 percent, 9.75 percent, and 10.75 percent for 3-, 5-, 10- and 20-year maturity, respectively while the settlement date April 23, 2015.
I would not recommend anyone to invest in PIBs. Mutual funds in the right way to do