The State Bank of Pakistan (SBP) raised a 166% lower amount than its target through the auction of three-month treasury bills that was organized on Wednesday in Karachi.
According to details, SBP received both competitive and non-competitive bids worth Rs. 541 billion for the auction of treasury bills against the target of Rs. 600 billion.
The central bank, however, rejected almost all of the bids, accepting bids worth just Rs. 56 billion against its Rs. 600 billion target.
SBP accepted competitive bids worth only Rs. 0.5 billion for three-month treasury bills. The central bank received bids worth Rs. 282 billion for three-month papers while its target for these bills through competitive bids was Rs. 200 billion.
It accepted non-competitive bids worth only Rs. 55.5 billion for three-month papers. SBP received bids worth Rs. 259 billion for three-month treasury bills while its target for these bills through non-competitive bids was Rs. 400 billion.
Besides, the SBP also raised Rs. 29 billion through competitive and non-competitive bidding of Pakistan Investment Bonds.
Why SBP Rejected Most Bids
Credible sources have disclosed that SBP rejected most of the bids because investors demanded exorbitant interest rates on the treasury bills as they believed the central bank will raise the interest rate after it gave an early monetary policy.
The central bank had initially planned to announce the monetary policy on 26 November but it decided to announce it on 19 November to reduce the prevailing uncertainty about monetary metrics in the market. If SBP raises the interest rate on 19 November, the rates of these bills would have automatically gone up.
Had the SBP accepted these bids with higher interest rates, the exchequer would have found it difficult to pay the money to the investors when they would have encashed the treasury bills at the end of their maturity period.
