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KARACHI: The State Bank of Pakistan (SBP) Tuesday rejected all the bids for three-month treasury bills because of higher rates, while it drained Rs 196 million through the auction of 12-month T-bills auction at a cut-off yield of 1.98 percent per annum.

There was an offer of Rs 7.03 billion against a pre-auction target of Rs 5 billion for 3-month and 12-month T-Bills auctions. There was a decline of one basis point in the 12-month cut-off yield, as last time the paper was accepted at 1.99 percent per annum.

“The central bank picked only Rs 196 million from the market because of the higher bids of the primary dealers,” said Naeemul Hassan, head of money market division at Invest Capital and Securities, a local brokerage house. “The central bank rejected these bids only because of the higher bids.” According to Mr Hassan, there was a liquidity crisis in the banking system for last three days and the overnight rates were shooting up three percent.

He added that there is a maturity of Rs 27 billion on December 1, while there would be an outflow of Rs 14 to Rs 15 billion.

The SBP did not want to pick a big amount on the last day of Ramazan because of the higher liquidity, but it has injected an amount of Rs 8.3 billion in the banking system to bring the short-term rates down in the money market. In six-month T-bills auction, the SBP drained Rs 200 million at an unchanged cut-off yield of 1.65 percent per annum.

The overnight cut-off yield brought down at 1.5 percent to two percent from three percent overnight after injection of the SBP in the money market, one-week at 3.50 percent per annum, two-weeks 2.50 percent, one-month 2.15, two-month 2.08, three-month 2.05 percent, six-month 2.13 percent and one-year paper 2.33 percent.