State Bank of Pakistan raises PKR 454 billion in a bond auction

The State Bank of Pakistan successfully raised PKR 454 billion ($1.6 billion) in a fixed bond Pakistan Investment Bond (PIB) auction held on Wednesday.

The bond sale exceeded the target of PKR 430 billion, while cut-off yields declined by 01 to 25 basis points.

The yields on the two-year bond fell 25 basis points to 11.69%. The yields on the three-year bond remained unchanged at 11.89%. The five-year bond yields decreased by 01 basis points to 12.34%, and the 10-year PIB yields declined by 01 basis points to 12.79%.

An analyst noted that non-development expenditures continue to heavily impact the budget, primarily due to soaring mark-up payments. These payments surged by 42% in FY24 and are projected to increase by another 20% in FY25, reaching an anticipated PKR 9.8 trillion.

However, substantial interest rate cuts could help reduce debt-servicing costs. The government's recent T-bill buyback program, funded by SBP profits, also aims to lower debt levels. Analysts estimate that these measures could bring debt servicing down to approximately PKR 7.8 trillion, 4.1% lower than FY24's PKR 8.2 trillion, and well below the budgeted PKR 9.8 trillion for FY25.