The State bank of Pakistan in its fortnightly Treasury Bills auction on Wednesday accepted bids worth realised value of Rs 7.447 billion against its target of Rs 4.5 billion by maintaining its last cut-off yield in all three tenors. Market''s offered amount was Rs 23.108 billion.
In 3-month, against offered amount of discounted value of Rs 13.737 billion, the SBP accepted Rs 1.472 billion at a cut-off yield of 8.10 percent.
In 6-month, against offered amount of Rs 2.165 billion it accepted Rs 488 million at a cut-off yield of 8 8.2910 percent, and in 12-month, against offered amount of Rs 6.294 billion it accepted Rs 5.516 billion at a cut-off yield of 8.7907 percent.
T/Bills auction bidding pattern suggested that majority of primary dealers refrained from purchasing security at the last cut-off price. Out of 14 primary dealers, 7 PDs participated in the auction, of which 2 were successful while the remaining 7 PDs were demanding a minimum of 10 to 13 basis points yield hike.
The Chief dealer of one of the leading commercial banks said, "The economic condition certainly demands hike in the yields as pressure has gathered momentum. I think, it is clearly visible, if we look at the SBP''s daily money market revaluation rate. It makes no sense to participate in the auction at the last cut-off yield when the papers of same tenor are available, which are better by 5 to 15 basis points yield."
A treasury head of a foreign bank said, "This could be the testing time for the central bank as banks are aware that with tighter SBP stance it cannot afford to leave liquidity in the system unchecked. When we could place our funds at around 8 percent, why should we bid T/bills aggressively and fall into a trap knowingly when the next up move is not far away. If the SBP tries to punish banks by keeping the market liquid, it may have to face a bigger problem, as the pace of private sector credit growth will further accelerate because banks will try to offload their excess money to the private sector.
"The central bank is already speechless if you look at the overall banks Deposit/Advance ratio, which is not a healthy sign from risk point of view.
It is the depositors'' money placed with banks, which is at high risk, and it is the central bank''s job to protect their money. Banks carrying Deposit/ Advance mismatches due to ambitious lending are already paying 1 percent 2 percent above the KIBOR rate to look healthy.
"On Thursday, there is Rs 28 billion maturity. There is T/bills maturity amount of Rs 4.55 billion and OMO maturity of Rs 23.5 billion. Hence, after the settlement of T/bills amount, net liquidity is expected to be around Rs 20 billion, which will be drained through SBP''s Open Market Operation (OMO)."
Meanwhile, in the interbank foreign exchange market it was another exciting day as the rupee traded in an 8 paisa band between Rs 59.92 and Rs 60 per dollar. The move was due to debt payment of USD 15 to 17 million, while another USD 18 million was settled by a major gas company. But exporters'' selling of dollars and offshore buying of rupee by banks eased the pressure on the rupee, which closed at Rs 59.95 per dollar.
One of the leading exporters said, "I like the change in environment provided by the SBP.
The volatility is preferable to our community. It is a healthy trend that provides us an opportunity to bargain at price that suits us. We hope this shift in the central bank''s policy would continue and would not be a one-time opportunity. We offloaded our dollars at 59.99."
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