Auction for floating rate PIBs on 21st


ISLAMBAD: The Finance Ministry said first issuance in the auction of floating rate PIBs would be on Oct 21, and afterwards there would be regular issuance.

The Finance Ministry highlighted floating-rate PIBs with quarterly coupons, features as well as benefits, tenors, timelines, and the ministry’s approach towards government securities portfolio.

Features are pre-determined coupon rate (equal to Benchmark Rate) – weighted average yield of three months T-bills in latest auction – Otherwise average of three month PKRV rates of last five days. Auction methodology is multiple price auctions (such as fixed-rate PIBs) yield to maturity to be determined through bond price (discount to bond price would determine the spread) and Statutory Liquidity Requirement (SLR) eligibility similar to three months T-bills.

Benefits included market higher yields relative to three month T-bills, interest rate risk similar to three month T-bills, potential for structuring of new products, government higher ATM, and lower Refinancing Risk.

The tenors would be 3-year, 5-year, and 10-year.

The Ministry of Finance approach to government securities portfolio include; (i) market demand keeps changing; (ii) provide a variety of options; (iii) indicate MoF’s preferences through pre-announced targets; (iv) evaluate market’s preferences through the bid patterns; (v) choose mutually-acceptable combinations of tenors/volumes/prices; (vi) Adherence to targets.

Targets are an indication of the MoF’s preferences, and these should not be seen as binding constraints as when market preferences and MoF’s preferences match, targets will be adhered.