December 21, 2006	Thursday	Ziqa'ad 29, 1427

KARACHI, Dec 20: Despite huge inflows the State Bank could hardly sell one sixth of the target it set for the auction of Treasury bills on Wednesday mainly because the banks avoided participation.

Money dealers said that higher bids were offered by the banks to get higher returns, which the SBP refused to accept. However, banks did not participate as was expected by the SBP.

“The market would receive about Rs100 billion as maturity of security papers on Thursday and the SBP had set Rs80 billion as target but the banks decided to avoid participation,” said a money dealer.

The SBP picked up only Rs16.450 billion against the target of Rs80 billion. Bids offered by the banks remained at Rs18.950 billion.

The State Bank sold Rs1.25 billion of 6-month bills, Rs294.15 million of 3-month bills and Rs14.91 billion of the 12-month paper.

Bankers said they made small participation in the wake of auction of Pakistan Investment Bonds (PIBs) scheduled on Thursday and expected outflow of cash due to Eid-ul-Azha.

Cut-off yield on benchmark 6-month T-bills remained unchanged with the same unchanged figures for 12-month and 3-month bills.

Bankers said the unchanged cut-off yields on the papers were expected due to ongoing tight monetary policy.

The money dealers said the SBP would come out with Open Market Operation (OMO) to siphon-off the excess liquidity in the market.

Dealers said the market remained tight in the last couple of weeks and the banks had to approach the SBP discount window to borrow for their immediate needs.