December 5, 2003	Friday	Shawwal 10, 1424

KARACHI, Dec 4: The State Bank on Thursday pumped Rs16.45 billion into the banking system — Rs5 billion for one week and Rs11.45 billion for two weeks ahead of a crucial auction of long term Pakistan Investment Bonds.

The SBP said it injected the funds through reverse repo of treasury bills at two per cent in both tenures at an open market operation.

Senior bankers said overnight call rates crashed to a quarter percent to zero per cent after this huge injection. They said the rates had opened around 1-1.25 per cent.

This was the sixth injection of funds the central bank made in a row since the start of the holy month of Ramazan in late October.

It had last injected Rs8.3 billion for one week — just one day ahead of Eid.

Whereas the injections made during Ramazan were aimed at keeping banks liquid enough to finance money withdrawals related to Eid spending the Thursday’s injection was meant to keep the banking system liquid ahead of a PIB auction later this week.

“This means the central bank is in no mood to let the yields on PIBs rise sharply,” said head of treasury of a local bank.

Sources close to the central bank say the reason why the State Bank does not want a sharp increase in PIBs yield is that it would send a signal to the market about a possible tightening of the monetary policy. “The SBP does not want to give any such signal,” said one of the sources.