KARACHI, Sept 4: The State Bank on Wednesday bought $12-$15 million from some local and foreign banks through its newly set up swap desk.
No senior SBP official was available to say anything about the operations of the swap desk but several senior bankers said the central bank bought $12-$14 million from banks for one month. One banker estimated the buying at $14-$18 million.
Bankers would not officially name the banks that entered into swap deals with the SBP but Dawn inquiries confirmed that two leading foreign banks entered into one-month dollar swaps with the SBP. The premiums at which the dollars were swapped by the SBP could not be learnt officially but a senior foreign banker said the premiums ranged between 13-16 paisa. Another foreign banker said the premiums ranged between 14-18 paisa over the spot price of the US dollar.
Under the swap arrangement, dollars are bought for a certain period at a price higher than the spot price of the currency by a few paisa with the understanding that the buyer will resell these dollars to those from whom they have been bought. In the present case the SBP did buy dollars from the banks under the same arrangement. So after a month it will resell these dollars to those banks that entered into this arrangement.
Senior bankers said in addition to dollar buying through swap the State Bank also continued ready dollar buying from the banks. But they could not exactly quantify ready dollar buying of the central bank. The bankers said the combined dollar buying helped the SBP facilitate a $20 million plus oil import bill payment by a state-run oil marketing company.
T-BILLS AUCTION: Meanwhile, the State Bank mopped up Rs17 billion from the inter-bank market through sale of six-month treasury bills worth Rs17.6 billion. The central bank lowered the weighted average yield on the bills by two basis points to 6.41 per cent to accept all the bids for six-month bills. But it rejected all bids for three-month and one-year T-bills.
The SBP had set a sale target of Rs6 billion prior to the auction of T-bills. But bankers close to the central bank said the reason why it had to suck in Rs17 billion from the system was that the SBP wanted to keep the yield structure stable.
But the very fact that the market came up with total bids of Rs60 billion against the target of only Rs6 billion shows that the banks are still hopeful of another rate cut. “The rate cut expectation is still alive,” said treasurer of a foreign bank when asked by Dawn to explain the rationale for heavy bidding.
Banks came up with large bids anticipating that in future the rate may be cut down and they may have to invest their surplus liquidity at a cheaper rate. “Besides the private sector credit has also not started picking up,” said treasurer of a big local bank. In Pakistan private sector credit disbursement picks up in late August or September after growers harvest fresh cotton crop and the ginners need bank funds to process it for industrial use.