KARACHI: The State Bank of Pakistan (SBP) has made amendments to the guidelines (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 the securities. As per amendment, 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.

Previously, 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.

In addition, under the E-Participation in auction through Non-Competitive Bidding (NCBs), now the investors will 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, ie, 0.50 percent 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, ie, 0.25 percent of the auction target subject to minimum of Rs. 25 million and maximum of Rs. 500 million. According to the SBP, these amendments shall come into force with immediate effect. All other instructions on the subject will remain unchanged.

Copyright Business Recorder, 2020