KARACHI: The State Bank of Pakistan (SBP) on Friday injected Rs1.8 trillion into the market to provide liquidity to banks. State Bank conducted Open Market Operations (OMOs), Reverse Repo Purchase (Injection) on February 24, and received 44 bids amounting to Rs1.953 trillion. Out of received bids, the SBP accepted 41 bids worth 1.8 trillion at 17.25 percent for 7-days.
In addition, the SBP conducted Shariah Compliant Mudarabah based OMO, Injection on February 24, 2023 and accepted Rs 20 billion worth bids at 17.25 percent.
Analysts said that an OMO maturity of Rs 2 trillion was due on February 24, 2023, therefore SBP is conducted OMO (injection) of shorter tenor.
It is pertinent to mention here that this OMO has been conducted at 17.25 percent compared to 19.95 percent cut-off yields in the latest T-Bill auction. This ‘abnormal’ spread has led to anticipation of an emergent meeting amongst financial market stakeholders with the majority now expecting a rate hike of some 2 percent in the next policy rate.
According to Arif Habib Limited, in an auction of Market Treasury Bills (T-Bill) held on Wednesday, the cut-off yields of 3M, 6M and 12M tenor increased by 195bps to 19.95 percent, 206bps to 19.90 percent and 184bps to 19.79 percent compared to previous auction.
With the data available since Jun’98, yields in all three tenors are at their historic high levels. The rise in treasury yields hint towards market weighing-in concerns on the economic front with the investors continuing to take note of rising inflation around the world as well as in Pakistan, analysts at AHL said.
The spread between the policy rate and T-bill rates continues to widen and the market is expecting interest rate hikes in the light of heightened inflationary pressures amid rise in domestic food prices, additional tax measures, tariff hikes and weaker currency.
Copyright Business Recorder, 2023
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