July 10, 2003	Thursday	Jumadi-ul-Awwal 9,1424

KARACHI, July 9: The yield on 12-month Treasury bill fell at an auction on Wednesday and dealers said they expected money market rates to remain soft.

The State Bank of Pakistan said it sold Rs75.72 billion ($1.3 billion) of three- and 12-month Treasury bills at the auction. The total included Rs7.97 billion of three-month paper and Rs67.75 billion of 12-month bills.

The bank said it received bids worth Rs153.3 billion against a pre-auction target of Rs70 billion. The bids included Rs8 billion for 3-month paper and Rs145.3 billion for 12-month bills.

The weighted average annual yield on 12-month bill fell to 2.1483 per cent against 2.3558 per cent at the previous sale on June 11.

The cut-off yield for the accepted bids on the 12-month T-bills was set at 2.1719 per cent against 2.3711 per cent at the previous sale.

“The drop in yields was expected because of surplus liquidity in the market,” said a dealer. “Yields at the auction are in line with the prevailing yields on the secondary market.”

Dealers said the drop reflected yields in the secondary market where 12-month paper was trading at 1.90-2.10 per cent.

The central bank said the weighted average annual yield and the cutoff yield for the three-month paper remained unchanged at 1.6575 per cent.

Dealers said overnight rates, which moved in band of 0.50 per cent to 1.00 per cent, were likely to remain soft after the auction, settlement of which is due on Thursday.

“The rates are not going to change,” said another dealer. “There will be an inflow of around 68 billion rupees tomorrow, which will offset the impact of the settlement.”

The maturity date for the three-month paper will be October 2, 2003, and for the 12-month paper July 8, 2004.

At the last auction on June 25, the bank sold Rs1.487 billion of six-month bills at a weighted average annual yield of 1.6558 per cent.—Reuters