February 14, 2008	Thursday	Safar 06, 1429

KARACHI, Feb 13: The State Bank increased on Wednesday the cut-off yield on Treasury bills, which was the first raise after the increase in discount rate.

The benchmark 6-month T-bills rose to 9.72 per cent from 9.29 per cent. Bankers said the impact of discount rate on T-bills was expected after the SBP’s monetary policy, which further tightened the policy by increasing discount rate through 50 basis points.

However, the central bank remained far behind the target it set for the T-bills auction. The target for the auction was Rs75 billion, while it raised only Rs45.576 billion through the auction.

The cut-off yields on the 12-month T-bills reached 9.97 per cent against the earlier rate of 9.4951 per cent. Similarly, the cut-off yields on the 3-month bills touched 9.45 per cent up from 9.09 per cent.

The SBP realised Rs14.878 billion for 3-month T-bills and Rs9.349 billion for six-month bills. The SBP raised the highest amount Rs21.348 billion for T. bills with one year maturity.

The costly borrowing from the State Bank compels banks to increase lending rates and make the money costlier for the borrowers.

Bankers said the SBP’s strategy to make money costlier was aimed to keep control over the rising inflation, however, they maintained that this could be only one sided action as the inflation was rising despite tight monetary policy strategy.