Pakistan central bank to hold 4th buyback of govt securities

Pakistan's central bank will step in for the fourth time to buy back government securities which will help lower the overall domestic debt.

According to information received by Nukta, the central bank will buy back PKR 400 billion worth of Pakistan Investment Bonds sold on floating rate from two auctions scheduled for March 9 and March 19.

These bonds were supposed to mature between April to June 2025, according to the document received by Nukta.

The State Bank of Pakistan held the first buy back on September 30, during which it bought back treasury bills amounting to PKR 351 billion at cut-off yields in the range of 16-16.01%.

The second and third buy backs were held on October 10 and October 31 respectively, mopping around PKR 200 billion and PKR 475 billion.

Saad Hanif, head of research at Ismail Iqbal Securities, said the central bank has opted to buy back government securities to reprofile its debt, turning short-term debt into long-term tenor.

The move will help the government to ease its interest costs.

In March, the cut-off yield for three months treasury bills was around 21.72%, six months 21.54%, and one year 20.73%.

Meanwhile, the 10-year Pakistan Investment Bonds were quoted at 14.22%. Currently, the yields are at 11.77%, 11.69%, 11.60%, and 12.25%.

During this period, the State Bank cut the key policy rate from 22% to 12% mainly because of decline in inflation rate which peaked at 38% in May 2023 but is now around a nine-year low.

Inflation for February is expected to be recorded at 2% and analysts believe that the central bank might announce a small cut of 50 basis points in the interest rate.