KARACHI, Nov 25: The State Bank on Thursday mopped up Rs23.5 billion from an excessively liquid inter bank money market repo sale of treasury bills for up to two weeks at an open market operation.

The central bank said it sold Rs19.45 billion TBs for one week and Rs4.1 billion for two weeks, both at 2.5 per cent. Senior bankers said the SBP had to conduct an OMO because it had failed to sell the targeted amount of TBs on Wednesday.

The SBP had set the sale target at Rs55 billion but managed to sell Rs26.9 billion TBs because of weak market participation and in order to avoid hiking the yields by a wider margin.

Since the Rs55 billion target was set keeping in view a huge inflow of Rs56 billion due into the banking system through maturity of previously sold TBs on Thursday, the failure to sell Rs55 billion bills left the SBP with no choice but to sell more TBs under repurchase agreements.

The TBs selling of Rs26.9 billion at the Wednesday auction and that of Rs23.5 billion in Thursday OMO, resulted into a combined outflow of Rs50 billion. But even this was lower than the actual inflow of Rs56 billion.

So the market closed with a couple of billions of rupees in surplus liquidity and overnight call rates around 1 per cent. Some bankers said the central bank may hold another OMO if the market remains excessively surplus.

The SBP is not allowing the banks to wallow in excess liquidity because this can weaken the rupee. The rupee has lost 20 paisa against the US dollar since the banks reopened after Eid holidays on November 18, though it has recovered about 2.5 per cent of its value since November 1. On Thursday the rupee closed at 59.86 a dollar in the inter bank market.