SBP buys back PKR 585.36 billion in PIB floating rate buyback auction

The State Bank of Pakistan accepted PKR 585.36 billion in bids at a buyback auction of five-year floating-rate Pakistan Investment Bonds, held September 10 with settlement due September 11. The auction is part of the government's effort to retire long-term domestic debt ahead of maturity.

How much did the SBP accept in the PIB floating rate buyback auction?

The central bank accepted PKR 585.36 billion in the five-year floating-rate PIB buyback, against a target range of PKR500 billion to PKR 600 billion. It received competitive bids worth PKR 1.306 trillion but no noncompetitive bids, and used the Pakistan Real-time Interbank Settlement Mechanism, or PRISM, to invite offers.

Which bonds were accepted in the buyback?

The accepted securities comprised six PIB floating rate issues, the SBP said. The largest acceptance was for bond PK05L0604280 at a face value of PKR 184.395 billion, followed by PK05L2706299 at PKR 140.691 billion and PK05L1804293 at PKR 115.705 billion.

The central bank also accepted PKR 81.567 billion of PK05L2109288, PKR 60.5 billion of PK05L1008283 and PKR 2.5 billion of PK05L1910280. Cut-off prices for the accepted securities ranged from 99.4235 to 99.7154, according to SBP data.

What was the total realized amount from the auction?

The total realized amount from the accepted securities was PKR 605.46 billion. That figure includes PKR 582.81 billion in realized value and PKR 22.65 billion in accrued interest, the SBP said.

Why is Pakistan retiring domestic debt early?

Industry sources said the buyback was facilitated by liquidity generated through the transfer of the SBP's profit to the government, giving the federal government additional fiscal space to retire long-term domestic debt. The SBP's profit transfer of around PKR 1.9 trillion has provided a cushion for early debt retirement, the sources said.

They added that the move could help reduce the government's debt-servicing burden while improving the maturity profile of its domestic borrowing. The government has previously used transfers of SBP profits to facilitate early retirement of domestic debt. The latest buyback follows the government's decision to actively manage its domestic debt portfolio through purchases of securities before their scheduled maturity.

How much domestic debt has Pakistan retired early?

The federal government conducted its first buyback auction of market treasury bills on September 30, 2024, accepting around PKR 351 billion of T-bills due to mature that December. Cumulative domestic debt retired before maturity has exceeded PKR 5.92 trillion, according to industry estimates, and is expected to cross PKR 6.5 trillion with the latest PIB buyback.

The strategy allows the government to use available liquidity to retire relatively expensive or longer-term debt ahead of schedule. This can potentially lower future interest costs and help smooth its domestic debt repayment profile. The latest auction also comes as Pakistan continues to focus on containing debt-servicing costs, which remain one of the largest components of federal government expenditure.