KARACHI (November 26 2002) : The State Bank of Pakistan has invited tenders for the auction of six-month Treasury Bills instead of scheduled three-month and one-year Treasury Bills, a move to set new benchmark rate after slashing of discount rate last week.
The central bank had slashed the discount rate by 1.5 percent to 7.5 percent last week. The market experts believe that the T-bills rate would be cut by 1 to 1.5 percent.
Most of the market experts predicted that 6-months T-bills rates would come down to 5 percent from prevailing 6.37 percent per annum.
The 6-months T-bills rate is usually considered as the benchmark which is the reason that the State Bank will hold auction of 6-months instead of scheduled 12-months and 3-months bills.
The State Bank has set a target of Rs 20 billion for the auction. Despite heavy withdrawal from the banks because of Eid season, the money market was still facing surplus liquidity as the rates were floating at much lower level.
The overnight rate was 2.5 percent while the weekly return rate was 3.5 percent and the same was for one month.
Money dealers said that the market was over liquid which crippled the rates. They estimated that the market was long with Rs 10 billion.
Even after the raising Rs 20 billion by the State Bank, the market would remain liquid as Rs 13 billion inflow through maturity of OMO is scheduled the next day.
“The flight of Rs 20 billion might help the money market to improve their rates,” commented a money dealer.