The poor participation of banks in treasury bills auction on Wednesday revealed that they are out of cash, particularly because of over investment in the last auction of Pakistan Investment Bonds (PIBs).
The banks have been discounting from the State Bank’s windows for the last three days, reflecting the liquidity crunch in the banking system.
The government could raise just Rs4.8 billion (against the target of Rs100bn) for three-month T-bills, while bids for six-month tenor (just Rs952 million) were rejected. No bid for 12-month was offered.
“For the last three days, the banks were discounting about Rs80-90 billion on a daily basis from the State Bank. This is enough to show their poor capacity to participate in the T-bills auction,” said S.S. Iqbal, a fund manager.
He said it happened because of massive investment of Rs152bn in PIBs on Sept 10 against the target of Rs100bn.