SBP makes amendments in Master Circular on auction of Government Securities

December 3, 2020 (MLN): The State Bank of Pakistan (SBP) has made some amendments in the Master Circular on Auction of Government Securities, as a step towards more market-driven pricing in the auction of government securities and diversification of the investor-base of government securities.

According to the circular issued on Tuesday, SBP has made changes to the guidelines related to Participation in Competitive Auction and Participation in Auction through Non-Competitive Bidding (NCBs).

Under the participation in competitive auction, Primary Dealers (PDs) will be required to submit competitive bids, for both Market Treasury Bills (MTBs) and Pakistan Investment Bonds (PIBs), in terms of price up to four decimal points.

Earlier, PDs were required to submit competitive bids, for both MTBs and PIBs, in terms of price (up to four decimal points). However, the bid price for long-term paper was required to confine to a range of 50 basis points from the respective tenor prices appearing on Reuters PKRV page on the last working day prior to bidding.

As per the amendments under the E-Participation in auction through Non-Competitive Bidding (NCBs), the investors will now be allowed to submit one bid in a single tenor, in case of submission of multiple bids in one tenor by single investor, all such bids would be treated as void. Further, the ceiling for one investor in a single tenor will be linked with pre-auction target, i.e. 0.50% of the auction target subject to minimum of Rs. 25 million and maximum of Rs. 500 million.

Previously, investors were allowed to submit one bid in a single tenor, in case of submission of multiple bids in one tenor by single investor, all such bids would be treated as void. Further, the ceiling for one investor in a single tenor was linked with pre-auction target, i.e., 0.25% of the auction target subject to minimum of Rs. 25 million and maximum of Rs. 500 million.

As per the circular, these amendments shall come into force with immediate effect. All other instructions on the subject will remain unchanged.

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