KARACHI: The State Bank of Pakistan (SBP) injected Rs430.5 billion liquidity into the money market on Friday for a seven-day period at 9.9 per cent against the offered amount of Rs480.5bn.

It’s the second consecutive open market operation (OMO) in which the SBP has shied away from injecting liquidity for a 63-day period — an unusual tenor that the central bank introduced on Dec 17 and conducted the three subsequent OMOs to provide the money market with a total of Rs1.8 trillion liquid assets.

The SBP provided the banks with liquidity for two months in order to bring down the yields on treasury bills, which had surged despite the central bank’s forward guidance about no change in the benchmark interest rate in the immediate term.

Cash that banks received through the 63-day OMOs was supposed to ease their liquidity constraints for a couple of months and encourage them to actively take part in the auctions of treasury bills at relatively lower rates.

However, the SBP’s move away from the unusual OMO tenor points to the diminished likelihood of interest rate stability following the monetary policy announcement due on Jan 24, analysts say.

Published in Dawn, January 22nd, 2022