Pakistan Investment Bonds attract $12.7m after hike in yields

Pakistan Investment Bonds

The data issued by the State Bank revealed that Pakistan Investment Bonds (PIBs) have attracted over $12.7 million foreign investment in the first week of March, helped the country’s external account to improve its reserves. 

The government of Pakistan has been accumulating long-term borrowing through Pakistan Investment Bonds and increased the cut-off yields by up to 42 basis points on February 27. Pakistan Investment Bonds are debt security, issued by the State Bank of Pakistan. These Bonds are issued in denominations of multiple of Rs.100,000.00 and are available in tenors of 3, 5, 10 and 20 years. The yield on these bonds is fixed and disbursed semi-annually.  

The coupon rate or semi-annual return on these bonds is paid until maturity. It is a good way to earn a competitive return, keeping the investment safe. There are two ways of investing in this way. Through primary dealers/ scheduled banks or through the Secondary market/ Stock Market.  

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In the country, Banks and other investors have invested more than $14 trillion in the Pakistan Investment Bonds. Pakistan Investment Bonds attracted over $12.7 million foreign investment in the first week of March. This investment will help Pakistan’s external account to improve its reserves. For the first after Covid-19, the foreign investment in domestic Bonds crossed the cumulative figure of $150m.  

The outflow from the PIBs is just $0.3m during the current fiscal year. The inflow has been constantly increasing. The latest increase in the BIPs rates increased the real interest rate, which made the investment more attractive.  

According to the State Bank of Pakistan, the entire amount of $12.7m invested in PIBs came from the United States. The Fed Reserve’s interest rate is at the lowest level of 0.25 %, which could be an important reason for the big investment from the United States.  

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The foreign outflow is higher than the foreign inflow. During this fiscal year, the amount of inflow in the Treasury bill was $424.2m and the amount of outflow is $628m. Although the foreign inflow is increasing yet the outflow is also on the higher side.  

During the current fiscal year, the amount of inflow in the equity market was $398.2m while the amount of outflow was $711.5m which shows the low confidence in the equity market which used to fluctuate. Bankers are of the view that inflow through Pakistan Investment Bonds is good news, but it may be problematic for the next government when the Bonds mature.   

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