SBP Surpasses Rs350b Target at PIB Auction, Gold and Rupee Trends Highlight Market Dynamics

January 16, 2025 Mahi Bukhari

SBP Raises Rs384.7 Billion in Latest PIB Auction

KARACHI: On January 15, 2025, the State Bank of Pakistan (SBP) successfully raised Rs384.7 billion through the auction of Pakistan Investment Bonds (PIBs). Surpassing its target of Rs350 billion, the auction underscored robust investor confidence, with total bids reaching Rs1,568 billion, a clear indication of strong demand for government securities.

Declining Cut-Off Yields Boost Borrowing Conditions

The auction saw a significant decline in cut-off yields across various tenors, ranging from 19 to 56 basis points (bps). New rates now span 11.90% to 12.80%, reflecting improved borrowing conditions:

2-Year PIBs: Notable drop in yields.
3-Year and 5-Year PIBs: Significant declines compared to previous rates.
10-Year PIBs: Yields remained stable, reflecting sustained confidence in long-term debt instruments.

This trend highlights improved macroeconomic stability and a positive outlook for Pakistan’s debt market.

Gold Prices Surge in Pakistan Amid Global Trends

Gold prices in Pakistan experienced a sharp rise on January 15, driven by global market trends. The price of gold per tola increased by Rs2,900, reaching Rs280,800, while 10-gram gold climbed by Rs2,487 to Rs240,741.

Volatile Gold Market Dynamics

On the preceding day, gold prices had dropped by Rs1,400, settling at Rs277,900 per tola. The rapid rebound reflects shifting sentiment influenced by international markets.

Global Gold Trends

In global markets, gold prices surged by $29, reaching $2,690 per ounce, supported by favorable US Consumer Price Index (CPI) data. This development bolstered the precious metal’s upward momentum as investors sought safe-haven assets amid inflation concerns.

US Inflation Data Fuels Global Market Sentiment

The US Labor Department reported a 0.4% increase in consumer prices for December, compared to a 0.3% rise in November. Over the last year, the CPI advanced 2.9%, marking a slight uptick from November’s 2.7%.

Factors Driving Inflation

Rising energy costs contributed significantly to December’s inflation rate.
The US Federal Reserve’s projection for fewer interest rate cuts this year aligns with sustained inflationary pressures.
Economic resilience and potential policy shifts, such as tariffs and deportations, are also influencing inflation dynamics.

Gold prices responded strongly to these developments, with Adnan Agar, Director at Interactive Commodities, forecasting further gains in the range of $2,700 to $2,720 per ounce unless new market-moving factors emerge.

Pakistani Rupee Slightly Depreciates Against US Dollar

The Pakistani rupee weakened marginally against the US dollar, dropping 5 paisa to close at 278.77 in the inter-bank market on January 15, compared to the previous day’s 278.72.

Global Currency Trends

Globally, the US dollar index eased by 0.2%, as traders anticipated the US inflation report. This decline supported gold prices while benchmark 10-year US Treasury yields slipped, further enhancing gold’s appeal as a safe-haven asset.

Key Highlights from January 15, 2025

1. Robust Investor Demand for PIBs

Total bids of Rs1,568 billion indicate strong confidence in Pakistan’s debt securities.

2. Gold Price Volatility

Domestic and international gold prices surged due to inflationary pressures and global economic trends.

3. Stable Cut-Off Yields

Declining yields reflect improved borrowing conditions and investor confidence in Pakistan’s fiscal stability.

4. Rupee’s Marginal Depreciation

The rupee’s slight drop signals continued pressure on the currency amid global market dynamics.

5. US CPI Impact on Global Markets

Higher-than-expected US inflation data influenced gold and currency markets globally.

FAQs

1. What is the significance of the SBP’s latest PIB auction?

The SBP raised Rs384.7 billion, surpassing its target, showcasing strong investor confidence in Pakistan’s government securities.

2. Why did gold prices rise in Pakistan?

Gold prices surged due to global trends, driven by US CPI data and heightened demand for safe-haven assets amid inflation concerns.

3. How did cut-off yields perform in the PIB auction?

Cut-off yields declined by 19 to 56 basis points, reflecting improved borrowing conditions and robust investor sentiment.

4. Why is the Pakistani rupee facing pressure against the US dollar?

The rupee depreciated due to global currency trends, influenced by US inflation data and market expectations.

5. What are the global implications of US inflation trends?

Higher US inflation has strengthened gold prices, impacted currency markets, and reduced expectations for aggressive interest rate cuts by the Federal Reserve.