WEB DESK: Tides have turned big time at the treasury markets – from a never ending appetite on both the borrowers and lenders part – to the dull happenings, things have surely changed.
And there is ample reason of why. The interest rates have dipped considerably, forcing market participants to think twice before locking in government papers at current rates.
The latest Pakistan Investment Bond (PIB) auction held just before Eid could only etch half the targeted amount. The government raised Rs54 billion, with the 3-year tenor paper forming the bulk of accepted bids at Rs40 billion. The cut-off yields interestingly, moved up a little from the previous auction. Recall that yields in both PIBs and t-bills surprisingly went up after the latest interest rate cut.
The 3-year PIB yields now exceed 8 percent and the 5-year paper yield is touching 9 percent. Seen in context of the prevailing rates, the differential appears significant enough for banks to participate heavily. But the participation pattern suggests that the market believes the rates to have bottomed out already. The government too, is not too keen to repeat the previous years mistake of accepting bids at very high yields – as reflected by two-thirds of bid amount that was rejected.
Had the government decided to persist with prevailing yields, the accepted bids would have been much lesser than Rs54 billion. There is no rush on the participant end as most investors sit pretty on decent portfolio, having earlier invested in PIBs holding them for maturities. In all likelihood, the PIB yields are going to continue inching north and that is why there has not been a significant change in banks asset mix strategies. Most investors, according to a market participant, are playing the wait and watch game.
Source: BR Research