KARACHI, March 17: Weighted average yields on treasury bills of three month and one year inched up on Wednesday to 1.52 pc and 2 pc from 1.49 pc and 1.97 pc a month earlier. The yields on TBs crawled up on higher demand for the bills by the banks that came up with Rs54.7 billion bids against the sale target of Rs45 billion.

The auction result announced by the State Bank showed that it sold Rs21bn three-month bills at a weighted average yield of 1.52pc and Rs20.6bn one-year bills at around two pc (1.996pc to be exact). But the cut-off yield or the maximum yield offered on three-month and one-year bills stood around 1.57pc and 2.05pc up five basis points and six basis points respectively from the February 18 levels.

Senior bankers said the cut-off yields too were a few basis points higher than where they were in February. They said that (i) National Bank (ii) Habib Bank (iii) United Bank (iv) Citibank and (v) Bank Alfalah were among major buyers of the bills in Wednesday auction.

The reason why the SBP sold Rs41.6bn bills against the target of Rs45bn was that it did not want the one-year TBs weighted average yield cross 2pc mark. "That would have sent a signal to the market that the central bank may revisit its interest rate policy," said treasurer of a large local bank.

Bankers said the inter-bank market closed with an estimated surplus liquidity of more than Rs10bn with overnight call rates at 0.20-0.25 pc.