KARACHI, Oct 16: The State Bank left the cut-off yield of six- month treasury bills almost unchanged on Wednesday amidst divided opinion on how long the SBP may keep the interest rates stable.

The central bank sold Rs19.75 billion worth of bills at a cut -off yield of 6.37 per cent — down only two basis points from the previous 6.39 per cent. This was the first separate auction of six -month bills called by the SBP to refrain banks from what the SBP officials say speculative overbidding.

Bankers said state-run National Bank and Habib Bank were the two main buyers of the T-bills: NBP purchased Rs10.15 billion worth of bills and HBL Rs5.90 billion.

ABN Amro Bank, which is one of the seven primary dealers, did not participate in the auction. Country manager of the bank, Naved A. Khan said the reason why the bank remained out of the auction was that its balance sheet position did not call for it.

When asked if his bank was trying to keep a low profile after elections as being speculated in the market, he strongly denied this impression: “This is absolutely ludicrous,” he said when reached by Dawn over telephone, adding that his bank had not made any change its operational policy. “Only a week ago we have launched a new product — a debit card,” he pointed out to prove that ABN operations were just normal.

Senior officials of NBP and HBL said the reason why they made huge investment in T-bills on Wednesday was that a few days ago the two banks had received inflows through maturity of previously purchased bills. So it was mainly reinvestment of the same funds.

But the officials of the two banks admitted that generally they had surplus liquidity at the moment particularly because the private sector credit was yet to pick up.

“There is enough growth in deposits but not matching growth in advances,” said a senior official of NBP. An HBL official made a similar statement.

Naved A. Khan of ABN Amro Bank, who heads treasury committee of Pakistan Banks Association, said the private sector credit would shortly pick up on cotton financing. He cited higher payments of tax rebates and lower commodity prices as main factors for slower credit offtake. He also agreed with Dawn that launching of term finance certificates by the corporates to raise liquidity and a better cash-flow management had also dampened demand for private sector credit. “Above all credit offtake is cyclical,” he said referring to the fact that credit demand picks up when the banks start giving loans for purchase and value-addition of cotton and other farm products.

Whereas the SBP succeeded in refraining the banks from overbidding in T-bills opinions stood divided on the possibility of interest rate cut, which has been the basic reason for this overbidding.

“Banks are unwilling to buy six-month bills at 6-6.25 per cent (from other banks),” said a local banker explaining the reason why some banks bought enough T-bills on Wednesday. “This shows that hopes for a rate-cut are still alive.”

“The hopes for a rate-cut are fading,” said a foreign banker who was of the view that the banks participation in Wednesday auction of six-month bills was not too big.

The auction generated Rs28.5 billion worth of bids against the sale target of Rs15 billion set earlier by the State Bank.

Of this the SBP accepted Rs19.75 billion bids and rejected the rest.