T-bill auction: SBP’s credibility at stake?
At least we had a Koonda, thought not the kind we expected
This post is written on a cellphone so I apologize as I couldn’t get an appropriate meme/picture to go with it.
رانجھا رانجھا کردی نی میں، آپے رانجھا ہوئی
— بلھے شاہ
شکاری خود یہاں شکار ہوگیا
یہ کیا غضب ہوا، یہ کیسے کب ہوا
— پروین بابی )نمک حلال )
The purpose of quoting aforementioned tweets is to show that
Minister of Finance (defacto) had threatened banks to reduce their bid price.
SBP Governor came on TV asking banks to “bid orderly” (whatever that means - most likely to reduce their bid price)
SBP as banking regulator made behind-the-scenes calls to banks to reduce the bid price.
In addition, some commentators praised MPS as providing clear “forward guidance”. In the same MPS, SBP called out the earlier bid behaviour of the banks as “unwarranted”.
Now if the banks believed the forward guidance provided in MPS, or found the threat of defacto Finance Minister credible, or trusted the SBP Governor who is running a campaign (for I don’t know what) with his media blitz, they would have changed their bidding behaviour in the next auction. But they didn’t.
I don’t think there is anything worse for a central bank than when the commercial banks (that are regulated by the central bank) no longer find the statements of the central bank and/or its Governor as credible. All the more shocking considering that Governor had left no stone unturned getting his message across as shown below.
Nov 19: RB interview to Kamran Khan
Nov 20: RB interview to The Profit
Nov 23: RB interview to FT
Nov 23: RB pens Op Ed for Dawn
Nov 24: RB interview to CNBC
Nov 29: SBP now issues “clarification to dispel misinterpretation circulating in certain sections of the media about previous monetary policy decisions”
Dec 6: Deputy Governor Murtaza Syed pens an Op Ed for Business Recorder
Dec 14: Governor RB goes on Shahzeb Khanzada show to explain Monetary Policy Statement.
We were promised bank’s koonda by Finance Minister. Instead what we get is Koonda of the credibility of Minister of Finance and SBP Governor by commercial banks.
As Ali Khizar said,
Market 1 ; SBP/MoF 0
Let’s see what MoF and SBP do to tell the commercial banks who wears the pants in this economy.