Pakistan raises PKR 342 billion in PIB auction as yields drop

The Pakistan government raised PKR 342 billion through a fixed-rate Pakistan Investment Bond (PIB) auction this week, exceeding its target of PKR 300 billion amid participation totaling PKR 1.696 trillion. Cut-off yields fell across the board, dropping between 30 and 54 basis points.

Yields on the two-year bond fell 54 basis points to 10.85%, while the three-year bond declined 35 basis points to 11.05%. The five-year bond dropped 31 basis points to 11.39%, and the 10-year bond decreased 30 basis points to 12.20%.

Earlier this month, the Finance Ministry outlined plans to raise PKR 5.575 trillion over the next three months through treasury bills and bonds. This includes PKR 2.4 trillion from PIBs — PKR 1 trillion through fixed-rate instruments and PKR 1.4 trillion via floating-rate bonds — along with PKR 3.175 trillion from short-term treasury bills.

The State Bank of Pakistan reported improvements in fiscal and primary balances for FY 2024-25, attributing gains to higher revenues and restrained government spending. However, a shortfall in external financing has increased the government’s reliance on domestic borrowing.

Looking ahead to FY 2025-26, Islamabad is targeting a primary surplus of 2.4% of GDP as part of its fiscal consolidation strategy.

The central bank expects economic growth to accelerate in the coming year, aided by previous interest rate cuts. Still, it cautioned that a widening trade deficit and weak financial inflows may pose risks, with certain proposed budget measures potentially increasing import pressures.