The State Bank on Monday mopped up Rs 40 billion through Open Market Operation (OMO) which pushed the overnight rate for a brief period which finally dipped again.
The State Bank rejected all bids for two weeks, and raised Rs 40 billion for four weeks at the rate of 3.05 percent. No bids were received for one week.
The news of OMO created short-term impact on the overnight rate, which rose from 0.25 percent to 1 percent, but after outflow of Rs 40 billion it again slipped to 0.25 percent.
The market was expecting higher outflow as it offered Rs 55 billion for the OMO but the SBP left the market liquid enough to bring back the overnight rate to its previous position.
Market punters said that the market was still liquid with Rs 35 billion, and OMO could not produce any result as far as the rates were concerned.
Resisting the market demand to increase interest rates, the SBP last week had rejected all bids for six months Treasury Bills.
The SBP had set a target of Rs 50 billion but the bids were in the range of 2.6 to 3.2 percent per annum which was not acceptable to SBP. The rejection suddenly swelled the market liquidity and inter-bank money rates floated at the bottom.
More liquidity is scheduled to come next week. Punters believe that SBP would have to conduct another OMO soon.
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