Qatar's central bank unexpectedly halved the size of a routine Treasury bill sale on Thursday, a sign that low oil and gas prices are starting to pressure the banking systems of Gulf Arab energy exporters.
The central bank auctions a total of 4 billion riyals ($1.1 billion) of three-, six- and nine-month Treasury bills every month. In the past, it has had no trouble finding buyers for the bills, and on Tuesday this week it scheduled a fresh 4 billion riyal sale for Oct. 1.
But on Thursday, the central bank ended up selling only 2 billion riyals of bills, while investors' bids totalled only 3.38 billion riyals, a brief statement on its website showed.
It was the first time since at least the start of this year that the central bank did not sell a planned amount of bills.
The statement offered no explanation, and a central bank spokesman was not available to comment. But commercial bankers attributed the smaller sale at least partly to low oil and gas prices, which are starting to tighten liquidity in banking systems around the region.
Because governments' energy revenues have shrunk, they have fewer fresh funds to deposit in commercial banks, which thus have less money to invest in securities or lend to companies.
"This T-bill auction was a reality check for the government and a reflection of tightening liquidity at Qatari banks," said one Gulf banker, declining to be named because of the sensitivity of the issue.
Other factors may have been partly responsible, bankers said. A month ago, the government issued 15 billion riyals of bonds; Eid Al-Adha holidays fell in September, cutting the number of working days, which may have left banks unprepared to absorb the supply of debt.
Bankers also said Qatar, the world's top liquefied natural gas exporter, faced no long-term liquidity crunch. Assets in its sovereign wealth fund are estimated to exceed $250 billion, and it could easily sell some of its overseas assets if it needed to replenish funds in its economy.
Nevertheless, a sharp rise in yields at Thursday's T-bill sale suggested the central bank may have to act carefully to prevent instability in the money market - especially with U.S. interest rates expected to begin rising this year.
Because of the riyal's peg to the U.S. dollar, the Qatari central bank is likely to have to match U.S. rate hikes.
Three-month T-bills were sold at a yield of 0.99 percent on Thursday, up from 0.85 percent at a sale on Sept. 1. The three-month interbank offered rate jumped to 1.25 percent from 1.19 percent on Wednesday.
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