KARACHI, Aug 5: The State Bank on Thursday borrowed Rs54.75 billion from the inter-bank money market to absorb part of the excess liquidity. It siphoned off this amount through borrowing against treasury bills.

The SBP said it raised Rs32.75 billion through sale of T-bills under repurchase agreement for two weeks at 1.25 per cent and Rs22 billion for four weeks at 1.65 per cent. The market was ready to lend to SBP Rs59 billion but it accepted bids worth Rs54.75 billion and rejected the rest.

Senior bankers said the mopping up of the liquidity from the market was well-timed to prop up the rupee that shed 50 paisa or 0.9 per cent of its value against the US dollar in the first three days of this week.

They said the decline in the liquidity level should keep the rupee stable for the time being. On Wednesday the SBP had sold Rs51.15 billion worth of three-month and one-year T-bills at a regular auction. Thus the liquidity level fell by around Rs106 billion within two days.

This should keep the market square or slightly liquid ahead of a heavy inflow of Rs101 due next week through maturity of previously sold T-bills. In Wednesday auction, the SBP raised the cut-off yield on three-month and one-year treasury bills by 13 basis points each to 2.18 and 2.83 per cent respectively. This sent a clear signal to the market that SBP would continue gradual hiking of interest rates.