The coupon rates for the PIBs to be sold in auction are unchanged at 6 percent, 7 percent and 10 percent, respectively.
The market reacted to the news and bond yield made substantial gains. The 5-year issued bond traded in a wide range from 6.80 percent to 6.25 percent yield; 10 years paper dipped below 8 percent yield to test 7.90 percent before bouncing back to 8.10 percent yield.
Market sentiment for interest rates remained bullish and a number of money market dealers were still looking for buyers to offload their bond holdings. Yields bounced back after buying interest dried up and sellers, stuck up with their old papers, were desperately looking for opportunity to sell.
Treasury head of a local commercial bank said, "The SBP is certainly trying various methods to calm down the market and, with auction target of Rs 60 billion against maturity of 102 billion with Rs 20 billion liquidity already available in the system, it is trying to bring interest rate stability in the market. But I see there is a bigger risk of ballooning of interest rate.
"Rs 3 billion PIB does not suggest that there is no borrowing required. Actually, the central bank is trying to signal the market that the coupon rate will remain unchanged for the time being."
Market will be keenly watching whether the SBP will stick to its given target or will drain larger amount by raising yield.