Government raises 155 billion rupees via GDP auction

KARACHI: The government raised 155 billion rupees on Wednesday from the auction of fixed-rate Pakistani investment bonds (GDPs), with yields falling on three- and five-year papers.

The three-year GDP yield fell slightly by 3 basis points (bps) to 13.97%, the outcome of the SBP GDP auction showed. The five-year paper yield lost 1 basis point to 13.18%. The 10-year paper yield remained unchanged at 13.15%.

Bids were rejected for the 15-year papers. Bids have not been received for 20 and 30 year old items. GDP yields were expected to fall in the coming weeks, following a drop in Treasury bond rates at an auction held on June 15.

The SBP frequently conducts a 63-day open market operation (OMO) to bring stability to the secondary market. Budget 2022-23 proposed that the tax rate on interest income from government securities from banks with an advances on deposits ratio (ADR) of 50% or more be raised to 45% from 35%.

For banks with an ADR of 40-50%, the rate was increased to 49% from 37.5%, and for banks with an ADR below 40%; it is increased to 55 percent.

The implementation of said increase in tax rates on certain ADR thresholds would apply retrospectively from 2021 (Tax Year 2022 onwards). This would likely lead to a higher effective tax rate of around 53% in 2022 and level off at 48% in 2023. led to higher secondary market yields on government securities at previous auctions.

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