January 19, 2006	Thursday	Zilhaj 18, 1426

KARACHI, Jan 18: The State Bank sold treasury bills worth Rs8.447 billion on Wednesday without any change in the cut-off yields.

The dry spell continued to dominate the money market as the overnight rate remained around 8 per cent despite Rs40 billion injected by the SBP in first two days of this week.

The SBP picked up Rs196 million, Rs576 million and Rs7675 million for three months, six months and 12 months respectively and the cut-off yield on all papers remained unchanged.

However, once again banks preferred to invest in 12-month paper and the bids offered for the one-year maturity paper was over Rs9 billion. The total bids offered were Rs13.788 billion.

One year investment provides banks an opportunity to use the paper to reinvest for short-term period and get more profits.

Analysts said that the market was short of liquidity despite an inflow of Rs8 billion on Thursday, the settlement day of the T-bills.

For more than a month the money market was running short of liquidity and the central bank looked comfortable with the situation.

Though the SBP injected Rs30.7 billion and Rs9.3 billion on Monday and Tuesday respectively but the move was not enough to bring the market at ease. Analysts said that the short-term injection of liquidity was not the solution. They were of the view that injection should be for longer period like 15 to 30 days.

However, they felt that the ongoing tight monetary policy might not allow it to relax the money supply. They said that the new monetary policy, to be announced on January 26, might bring some change for the market.

But the newly-appointed State Bank Governor, Dr Shamshad Akhtar, in her first media exposure on Saturday last announced that there was no need to change the current policy mix and adjustments could be made if required.