The Reserve Bank of India has announced a change in Government securities auction methodology for benchmark securities.
06 July 2021 Current Affairs:The Reserve Bank of India has announced a change in Government securities auction methodology for benchmark securities. They referred to in the contemporary update that on a overview of market conditions and market borrowing program of the government, it has been determined that benchmark securities of tenor 2-year, 3-year, 5-year, 10-year, 14-year tenor and Floating Rate Bonds (FRBs) will be, henceforth, issued the use of the uniform price auction method.
Highlights:
♦ For other benchmark securities i.e. 30-year and 40-year, the auction will continue to be a couple of price-based auctions, as hitherto. The above association will proceed until further review, be aware of the bank.
♦ About the Uniform Price auction: In a Uniform Price auction, all the profitable bidders are required to pay for the dispensed extent of securities at the identical rate, i.e., at the auction cut-off rate, irrespective of the price quoted with the aid of them.
♦ About the Multiple Price auction: In a Multiple Price auction, the successful bidders are required to pay for the allotted volume of securities at the respective price/yield at which they have bid.
Highlights:
♦ For other benchmark securities i.e. 30-year and 40-year, the auction will continue to be a couple of price-based auctions, as hitherto. The above association will proceed until further review, be aware of the bank.
♦ About the Uniform Price auction: In a Uniform Price auction, all the profitable bidders are required to pay for the dispensed extent of securities at the identical rate, i.e., at the auction cut-off rate, irrespective of the price quoted with the aid of them.
♦ About the Multiple Price auction: In a Multiple Price auction, the successful bidders are required to pay for the allotted volume of securities at the respective price/yield at which they have bid.