KARACHI, Dec 10: Banks finally surrendered their excess liquidity at a lower rate to the State Bank of Pakistan (SBP), which picked up the leftover liquidity on Saturday.

The SBP conducted another Open Market Operation (OMO, which was third in the sequence, but the rates fell further. The SBP mopped up Rs13.700 billion, out of the offered amount of Rs19.650 billion.

The banks, which were making efforts to increase the OMO rates by holding liquidity, were compelled on Saturday selling their excess liquidity. Their holding of liquidity resulted in sharp decline in money rates and overnight rate closed at 2 per cent on Friday.

The outflow of Rs13.7 billion suddenly supported the money rates, which rose and closed at 6 per cent. The SBP picked up this money at 7.85 per cent, while on Friday, the rate was 7.97 per cent. Banks had been seeking higher rates above 8 per cent but finally they rented out their liquidity at much lower prices.

The SBP managed to liquidate the market well in time for the next T-bills auction as the OMO conducted on Saturday would be matured after 12 days.

“The T-bills maturity of Rs41 billion is scheduled till the next auction while the recently mopped up money of about Rs17 billion would also mature at the same time,” said a broker.

At the time of next auction about Rs58 billion would be available, which will help the SBP to sell as much volume of T-bills as possible. The SBP looked stuck up with glut of T-bills worth Rs132 billion. The presence of huge unsold T-bills could be a strong reason for increasing inflation.

“I believe that the SBP will try to sell T-bills of not less than Rs60 billion,” said an analyst.