Pakistan 10-year bond cut-off yield fixed at 1o.1332%

Karachi: Pakistan's central bank set a cut-off yield of 10.1332 per cent on the benchmark 10-year investment bond at an auction yesterday, down from 10.1988 per cent previously.

The State Bank of Pakistan also set a cut-off yield of 10.9800 per cent on the 15-year Pakistan Investment Bond (PIB), margin-ally lower than 10.9815 per cent set in the last auction on March 5.

"The cut-off yields were very close to the levels at which the bonds have been trading in the secondary market in recent days," said a dealer at a local bank.

Demand

Dealers said secondary market yields had eased slightly since the last auction due to increased corporate demand for long-term papers.

For the five and three-year bonds, the cut-off yield was set at 9.6197 and 9.3315 per cent respectively.

In the last auction, the cut-off yields on the five- and three-year PIBs were set at 9.7652 and 9.3690 per cent respectively.

The central bank also set cut-off yields of 11.1999 and 11.5906 per cent for the 20- and 30-year PIBs. It had rejected all bids for these two papers in the last auction.

The central bank said it sold a total of Rs15.51 billion ($255.64 million) worth of PIBs, after receiving bids worth about Rs49.6 billion. It had set a combined pre-auction target of Rs15 billion.

Settlement of the auction will be on Monday.

"The heavy participation is due to the awareness among corporates, both state-owned and non-state owned, regarding diversification of their liquid funds in long-term, risk-free government papers," said Zafar Shaikh, additional dir-ector general at the Finance Ministry's debt office in Islamabad.

This was the fourth PIB auction to be conducted by the government in the 2006-07 fiscal year, which began on July 1, and officials say that the government will continue to hold regular auctions to support the domestic debt market.

The three-, five-, 10-, 15- and 20-year PIBs carry annual coupons of 9.1, 9.3, 9.6, 10 and 10.5 per cent respectively, while the 30-year paper carries a coupon of 11 per cent.