The State Bank on Wednesday left the market liquid when it raised only Rs 17 billion against Rs 60 billion target, but the cut-off yield went further higher on 3-month T-bills. The money market witnessed slight decline in the rates, though dealers were expecting sharp decline on Thursday.
The State Bank, which raised Rs 17.332 billion out of the offered amount of Rs 40.921 billion, rejected all bids for 12-monht T-bills.
One of the reasons for rejection might be the very small amount offered for 12-month maturity bills and higher asking rates. The offered amount for 12-month T-bills was just Rs 1.440 billion.
The overnight rate, which remained at 7.4 percent for seven days, declined to 6.4 percent. "The overnight rate might have further declined if the results of the auction had come earlier," commented a money market dealer.
The cut-off yield for three months rose to 2.9750 percent from earlier 2.66 percent. Experts found it an indication of higher interest rate.
Money market men were expecting a sharp decline on Thursday in wake of Rs 85 billion inflow. At the same time, they mentioned that the banks had to go for a discounting of Rs 70 billion last week.
It means that the market was short of liquidity and the inflows of Rs 85 billion might not flood the market with liquidity, observed the experts.
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