July 24, 2003	Thursday	Jumadi-ul-Awwal 23, 1424

KARACHI, July 23: The weighted average yield on Treasury bill auction fell to 1.2116 per cent at an auction on Wednesday, and dealers said overnight rates were likely to remain low.

The average yield on six-month paper fell sharply at the auction from 1.6558 per cent at the previous sale on June 25, the State Bank of Pakistan said.

The SBP said it had sold Rs26.94 billion ($467 million) of six-month bills after offering Rs25 billion worth and receiving bids totalling Rs41.57 billion.

Money market dealers said the drop in the yield was expected, reflecting yields in the secondary market where six-month paper was trading at 1.10 per cent to 1.15 per cent.

“The drop was very much expected,” said a dealer. “It reflects the market viewpoint that yields will remain under pressure due to high liquidity in the banking system.”

Dealers said overnight money rates, currently hovering between 0.25 per cent and 0.40 per cent, might rise slightly following the auction settlement.

“I do not see any major spike in rates because there will be an inflow of Rs11 billion in addition to the current surplus liquidity,” said another dealer. “Rates may go up to 1.00 per cent on Thursday but it will not be sustainable.”

The central bank mopped up Rs11 billion from the market last Thursday by selling one-week bills in an open market operation, but those bills will mature this week.

Maturity for the six-month Treasury bills will be January 22, 2004, and settlement is due on Thursday.

At the last auction on July 9, the central bank sold Rs75.72 billion worth of three- and 12-month Treasury bills at a weighted average yield of 1.6575 per cent and 2.1483 per cent, respectively.—Reuters