KARACHI, Dec 7: The State Bank on Wednesday could not raise the liquidity it targeted through the selling of treasury bills mainly because the banks were asking for higher return.
The SBP had set a target of Rs35 billion through the auction of T-bills and wanted to pick up the whole inflows of Rs35 billion scheduled for Thursday but the bidders (banks) were not ready to purchase the bills at the prevailing prices.
Following the tight monetary policy, the SBP refused to sell the T-bills at any higher prices and rejected all bids of 3 and 6 months maturity.
However, the bids offered were below the target and total bids reached Rs34.472 billion. Bids offered for 3-month started from 8.1 per cent to 8.29 per cent while the 6-month T-bills received offers at 8.29 per cent to 8.55 per cent. These rates were higher than the prevailing rates which prompted rejection from the SBP.
However, highest bids of Rs23.441 billion were offered for 12-month T-bills and it was the only attraction for the SBP which realized Rs19.6 billion at a cut-off yield of 8.7907 per cent.
The tight interest rate policy followed by the SBP did not allow it to increase the cut-off yield and found it easier to leave the market under liquidity.
However, analysts believe that the SBP would hold Open Market Operation (OMO) to pick up the remaining liquidity from the market.
They also said that the banks were eager to invest for longer period which reflects their concern about the interest rates and believe that rates would come down within a year.
