22 January 2004	Thursday	29 Ziqa'ad 1424

KARACHI, Jan 21: The State Bank on Wednesday again scrapped 81 per cent of the bids received for three-month and one-year treasury bills to keep their yields from rising.

This action was a repeat of what the SBP had done on December 24 - it had scrapped 96 per cent of the bids received for T-bills of same maturity for the same purpose.

The auction result announced by the central bank showed that it sold only Rs10 billion TBs and rejected Rs44 billion of them. The auction had generated Rs54 billion bids of which the SBP accepted Rs7 billion bids for three-month TBs and Rs3 billion for one- year.

The weighted average yield on three-month and one-year TBs worked out to be 1.48 per cent and 1.96 per cent, respectively, almost unchanged at the previous level of 1.46 per cent and 1.99 per cent.

SBP sources said the central bank had to scrap 81 per cent of the total bids received for TBs to keep the yields from rising because that could have created an impression that the monetary policy is being tightened. But senior bankers said this frequent scrapping of bids in the past few months showed that something was wrong somewhere.

"There is one thing called the sanctity of auction target... SBP cares the least about it," complained head of treasury of a local bank. The central bank had set the combined sale target for three-month and one-year bills at Rs60 billion against which it sold only Rs10 billion TBs.

Bankers said had the SBP accepted all bids it would have to raise the yield on both three-month and one-year bills substantially - by 50-100 basis points. That it did not want to do.

They said SBP would likely conduct an open market operation on Thursday to suck in the leftover liquidity from the inter-bank market. The market is due to receive an inflow of Rs64 billion on Thursday through maturity of previously sold treasury bills.