KARACHI, Nov 08: The State Bank on Tuesday simultaneously picked up liquidity through sale of treasury bills and then injected higher amount through reverse repo to cool down the heated money rates.

The SBP sold treasury bills of three-month, six-month and 12-month maturity without a change in cut-off yield. The central bank raised Rs7.652 billion, which immediately created a liquidity shortage and the SBP came back with Rs11.480 billion to inject into the system.

Banks preferred to invest in one-year T-bills despite a liquidity shortage and were willing to invest more, as the bids offered for 12-monthn T-bills alone accounted for Rs17.142 billion. The total bids offered for investment were of Rs20.952 billion.

The SBP sold T-bills of three-month for Rs352 million at a cut-off yield of 8.1 per cent, six-month for Rs150 million at 8.1388 per cent and 12-month for Rs7.150 billion at 8.7784 per cent.

The outflow of Rs7.652 billion further squeezed the liquidity availability which kept the money rates at the highest level. Banking sources said the overnight rate was noted as 8.5 to 8.9 per cent.

The injection of Rs11.48 billion eased up the money market but the demand remained high despite closure of banks on Wednesday on account of ‘Iqbal Day’.

Analysts said banks might have to go for discounting from the SBP window on Thursday, but bankers maintained that inflows from the business community had already started. The bankers said the outflow during Ramazan would come back into the banking system through different channels and the process would be completed within a week that might further ease the liquidity crunch.