The State Bank of Pakistan (SBP) on Thursday said it accepted Rs. 585.36 billion of bids in a buyback auction of five-year Pakistan Investment Bonds floating rate securities, as the government moves to retire long-term domestic debt ahead of maturity.
The central bank said it had invited bids through the Pakistan Real-time Interbank Settlement Mechanism, or PRISM, for the buyback of five-year PIBs floating rate securities, with a target range of Rs. 500 billion to Rs. 600 billion. Held on Sept. 10, the auction’s settlement was scheduled for Sept. 11.
According to the SBP, it received competitive bids with a face value of Rs. 1.306 trillion and accepted securities with a face value of Rs. 585.36 billion. No noncompetitive bids were received, it said.
The accepted securities comprised six PIBs floating rate issues. The largest acceptance was for bond PK05L0604280 at a face value of Rs. 184.395 billion, followed by PK05L2706299 at Rs. 140.691 billion and PK05L1804293 at Rs. 115.705 billion, the SBP said.
The central bank also accepted Rs. 81.567 billion of PK05L2109288, Rs. 60.5 billion of PK05L1008283 and Rs. 2.5 billion of PK05L1910280. The total realized amount from the accepted securities was Rs. 605.46 billion, including Rs. 582.81 billion in realized value and Rs. 22.65 billion in accrued interest.
Cut-off prices for the accepted securities ranged from 99.4235 to 99.7154, according to the SBP data.
Debt retirement
Industry sources said the latest buyback was facilitated by liquidity generated through the transfer of the SBP’s profit to the government, giving the federal government additional fiscal space to retire long-term domestic debt.
The SBP’s profit transfer of around Rs. 1.9 trillion has provided a cushion for early debt retirement and could help reduce the government’s debt-servicing burden while improving the maturity profile of its domestic borrowing, the sources said.
The government has previously used transfers of SBP profits to facilitate early retirement of domestic debt. The latest buyback follows the government’s decision to actively manage its domestic debt portfolio through purchases of securities before their scheduled maturity.
Buybacks gain momentum
The federal government conducted its first buyback auction of market treasury bills on Sept. 30, 2024, accepting around Rs. 351 billion of T-bills due to mature in December that year. Cumulative domestic debt retired before maturity has exceeded Rs. 5.92 trillion, according to industry estimates. With the latest PIB buyback, the amount is expected to cross the Rs. 6.5 trillion mark.
The strategy allows the government to use available liquidity to retire relatively expensive or longer-term debt ahead of schedule, potentially lowering future interest costs and helping smooth its domestic debt repayment profile. The latest auction also comes as Pakistan continues to focus on containing debt-servicing costs, which remain one of the largest components of federal government expenditure.