KARACHI: The amount of interest payment by the government on domestic debt has crossed Rs1 trillion during Fiscal Year 14.
During the second half of last fiscal year, the government re-profiled its domestic debt towards longer term maturity and borrowed more through the auction of Pakistan Investment Bonds (PIBs) compared to Market Treasury Bills (MTBs).
The State Bank of Pakistan (SBP) 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 Rs151.3b through the auction while the target set for the entire quarter was Rs150b.
Banks invested the highest amount in three-year PIBs worth Rs91b while they offered highest amount of Rs157b 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. The auction reflects the same path adopted by banks.
The market witnessed large trading in 10-year PIBs and the cut off yield fell sharply in the secondary market.
