KARACHI, April 30: The weighted average yield on treasury bill edged up on Wednesday and bankers said it signalled that the market was stabilising at yield levels.

The average yield on the six-month paper rose to 1.6540 per cent at the auction from 1.6389 per cent at the previous sale on April 2, the State Bank said.

The central bank said it sold Rs12.10 billion ($209.2 million) of six-month bills after offering Rs10 billion and receiving bids totalling Rs27.47 billion.

“I think the yields are now stabilizing. Banks are not prepared to bid very low given yields are already at historic lows,” said a banker.

“But that does not mean we can see yields going up in near future because the reality is that there is high liquidity in the banking system and investment options are limited.”

Heavy foreign currency inflows, lower inflation and a dearth of investment opportunities have combined to create excess liquidity in the interbank market, depressing yields.

The bank set the cut-off yield for the six-month paper at 1.6878 per cent, down from 1.7193 per cent at the previous auction.

Dealers said overnight money rates, currently hovering in the range of 1.75 per cent to 3 per cent, were likely to be steady.

“I think overnight money market rates will largely remain stable because market has sufficient liquidity,” said another dealer. “I think the rates will generally remain in a band of 1.50 per cent to 3 per cent in the near-term.”

Maturity for the latest six-month paper will be October 30.

At the last auction on April 16, the bank sold three- and 12-month paper worth Rs24.31 billion.—Reuters