Pakistan Investment Bonds (PIBs) attracted over $12.7 million foreigninvestment in the first week of this month following the recent increase inthe cut-off yields.
The State Bank of Pakistan (SBP) data shows that the entire amount of $12.7million invested in PIBs came from the United States. The Fed Reserve’sinterest rate is at the lowest level of 0.25 percent, which could be one ofthe reasons for higher investment from the US.
Out of total inflows of $150.3 million in PIBs, around $104 millioninvestments came from the United States. The government has beenaccumulating long-term borrowing through PIBs and increased the cut-offyields by up to 42 basis points on February 27.——————————
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The cut-off yield rose to 9.41 percent for three-year PIBs, 9.9 percent forfive-year, and 10.05 percent for 10-year bonds.
For the first time since the COVID-19 pandemic outbreak in March 2020,foreign investments in domestic bonds crossed the cumulative figure of $150million.
However, this time the outflow from PIBs is almost negligible as it wasjust $0.3 million during the current fiscal year. The inflow in PIBsstarted in November 2020 and has been growing.
The latest increase in the PIBs rates increased the real interest rate,making the investment more attractive.
The foreign inflow in treasury bills continued, but the outflow is higher.During the current fiscal year, total inflows in treasury bills were $424.2million, while the outflows were $628.2 million.
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Before the pandemic, total inflows – mostly in T-bills – were $3.5 billion.However, within a few months, most of the investments returned to theirorigin.
The foreign inflows in the equity market continue, but the outflows arealso higher. During the current fiscal year, inflows in the equity marketwere $398.2 million against the outflows of $711.5 million, reflecting lowconfidence in the fluctuating equity market.——————————
Bankers said the inflow through PIBs was encouraging, though it may createproblems for the next government when the bonds mature.
Pakistan has remained a high-inflation economy which offers higher interestrate and investors such as banks are earning most of their profits fromgovernment papers.
Banks and other investors have collectively invested more than $14 trillionin the PIBs. However, no data is available that could show which tenureattracted most of the investments.
Bankers noted that the three-year PIBs with 9.4 percent returns have becomevery attractive for foreign investors.
