KARACHI, Jan 7: The State Bank on Wednesday allowed the cut- off yield on six-month treasury bills to inch up but kept the weighted average yield unchanged.

Bankers say that by doing so the SBP has signalled to the market that whereas it would keep the inflationary pressure in check it may not necessarily give up its easy monetary policy stance. The central bank is due to make a monetary policy statement this month.

SBP sold Rs8.3 billion six-month T-bills well above the target of Rs5 billion at a cut-off yield of 1.71 per cent up slightly from 1.65 per cent in the last auction. But weighted average yield remained unchanged at 1.64 per cent.

The auction results released by SBP showed that the central bank had received total bids worth Rs14.6 billion. Of this it accepted Rs8.3 billion bids and scraped the rest. Bankers said among the successful bidders Habib Bank was on the top followed by National Bank, United Bank and Citibank. They said there was some liquidity available with banks even after the auction.

In the recent past SBP has jealously guarded the TBs cut-offs to dispel impression among bankers that it was about to change its easy monetary policy stance. At times it also had to scrap TBs auctions altogether because the bids received were too high. But the Wednesday move of allowing TBs cut-off to inch up shows that the SBP is alive to the inflationary pressure that has been mounting up. Consumer inflation in five months to November rose 2.62 per cent against full year target of 3.9 per cent. SBP said recently that it might settle around 3.6-4.2 per cent during this fiscal year.

So, the inching up of TBs yield shows that SBP wants to contain inflation. But the unchanged weighted average yield indicates it would not give up its monetary policy stance.