KARACHI: The State Bank of Pakistan (SBP) injected Rs479.5 billion liquidity into the money market on Fri­day for a seven-day period at 9.95 per cent against the offered amount of Rs558.5bn.

The latest open market operation (OMO) is different from the four recent OMOs in which the central bank injected a total of Rs1.8 trillion for the unusually long tenors of 63 days. In its Dec 17 OMO, the SBP introduced the 63-day tenor to bring down the yields on treasury bills that surged despite the central bank’s forward guidance suggesting no change in the benchmark interest rate in the immediate term. The SBP maintained the unusual tenor for the three subsequent OMOs held on Dec 24, Dec 31 and Jan 7.

Cash that banks received through the 63-day OMOs was supposed to ease their liquidity constraints for two months and encourage them to actively take part in the auctions of treasury bills at relatively lower rates.

Analysts believe that the SBP’s shift away from the 63-day tenor points to the diminished likelihood of interest rate stability after the monetary policy announcement of Jan 24.

“This implies that the SBP is not too confident about policy rate stability beyond the January 2022 announcement. Although it was never the SBP’s stance, expectations existed in the market after a series of 63-day OMOs,” said Fahad Rauf, head of equity research at Ismail Iqbal Securities Ltd.

The yields in the secondary market are slightly up, with the rate on the six-month paper trading 10-15 basis points higher, he added.

Published in Dawn, January 15th, 2022