Govt bonds fail to attract dollars despite record returns

A record increase in returns on treasury bills and Pakistan Investment Bonds (PIBs) has failed to attract a single dollar. The State Bank of Pakistan (SBP) increased the interest rate by 300 basis points to 20 per cent and the discount rate to 21pc on March 2 to counter high inflation. Before announcing the interest rate hike, the government had already increased the treasury bill returns to 21pc. Banking experts said the decision favoured investors, mostly banks, but was against the government as the borrowing became too costly. However, there was an expectation in the financial market that with 21pc returns on treasury bills, foreign investors would join the race to get maximum benefits. The returns are the highest in the region, including India and Bangladesh. Data shows that there has been no inflow in treasury bills and PIBs since the beginning of the second half of this fiscal year. The first half (July-December) was also not encouraging as the inflows in treasury bills were just $18m while the outflows during the same period were $59m. There was no inflow in PIBs, while the outflow was $0.328m in the first half.