KARACHI, Oct 11: The State Bank plans to sell Rs5 billion six-month treasury bills on Wednesday to mop up part of Rs10 billion inflow through maturing T-bills on Thursday, when the settlement of this auction would take place.

Senior bankers say they are expecting a modest increase in the weighted average yield on six-month bills in line with the State Bank's policy of measured tightening of interest rates. Estimates vary, however. Some bankers anticipate up to 20 basis points rise in the yield but others say it may rise by 30bps or even more.

Last month, the central bank had raised the weighted average yield on six-month bills by 38bps to 3 per cent. Since the start of this fiscal year in July, it has increased the weighted average yield by 93bps on six-month bills and by 125bps and 78bps respectively on three-month and one-year bills to contain inflation.

But consumer inflation or inflation measured by Consumer Price Index covering 374 items of daily use rose by more than 9 per cent in July-September 2004 year-on-year, against the full fiscal year target of 5 per cent.

Sources close to the SBP say the central bank has set a small auction target of Rs5 billion for selling six-month T-bills to avoid increasing its yield sharply. They say SBP would not allow a substantial rise in the yield adding that a 15-20bps increase in the yield looked most likely.

They said another reason for keeping a low auction target was that SBP was trying to leave enough liquidity in the banking system ahead of Ramazan starting from Saturday to enable banks to finance Ramazan-related withdrawals from deposits.

RUPEE: Meanwhile, the rupee lost another 2 paisa in the inter-bank market on Monday falling to 59.42 a US dollar at the end of the trading hours from 59.40 on Saturday.