PIB yields drop on rate cut optimism

The yields on fixed-rate Pakistan Investment Bonds moved lower on Thursday, as traders expect a shift in the central bank’s monetary policy from a tightening bias to an easing.

 

The cut-off yield on a two-year PIB decreased by 70 basis points (bps) to 11.45 per cent. The yield on the three-year paper also declined 60 bps to 11.49 per cent. The yield on the five-year bonds was down 56 bps to 11.63 per cent. The yield on the 10-year paper fell 47 bps to 12.14 per cent.

 

The government raised Rs566 billion from the auction of the fixed-rate PIBs against the target of Rs350 billion.The latest PIBs’ auction result comes after consumer price index inflation rose 11.1 per cent year-on-year (YoY) in June, a decrease from 11.7 per cent in May, and fell within the government’s projected range of 11 per cent to 12 per cent.

 

“The latest PIB auction suggests that the market believes the policy rate has reached its peak, with investors viewing the last April 26 100 bps hike as the final move in the current tightening cycle,” said Saad Hanif, head of research at Ismail Iqbal Securities Limited.

 

“As geopolitical risks have eased following the de-escalation in the US-Iran conflict and inflation expectations remain well anchored, markets are increasingly pricing in policy stability in the near term, followed by a gradual easing cycle once macroeconomic conditions permit,” Hanif said.

 

“The sharp decline in PIB cut-off yields reflects the unwinding of the geopolitical risk premium and growing confidence that monetary policy has shifted from a tightening bias to easing,” he added.
 

Source: The International News Pakistan