Beruflich Dokumente
Kultur Dokumente
GOVERNMENT
SECURITIES
MARKET
Dr. Kulbir Singh
(IMT-Nagpur)
Lecture Objectives
Features of Government Securities
Modalities of Borrowing
Measures of Reform in Govt. Securities Market
Impact of Reforms in meeting fiscal deficit of Govt. and
liquidity in market.
Auction CSGL
CCIL
Gilt Individuals
A/c
/Trusts
Scheduled
Banks
Insurance
Companies NDS-Auction Non-Scheduled
Platform Banks
Pension &
Provident Mutual
Funds Funds
G-Sec Measures of Reforms
Purpose of reforms since 1992-93:
To widen and deepen the primary and secondary segments
of govt. securities market with a view to ensuring a proper
fiscal-monetary coordination.
Elongation of maturities
Consolidation of new issues in key maturities
Enhance of liquidity and fungibility
Promotion of retailing in these securities
Enhancement of transparency in govt.s borrowing
programme
G-Sec Measures of Reforms
Diversifying the Issue
New variants of T-Bills with different maturities, such
as 364-, 91-, and 182-day T-bill, were introduced
Dated securities were diversified in terms of maturity
varying from 2-10 yrs, 25 yrs.
In 2020, 30-yr bonds were issued.
Since July 2020, Floating-rate bonds too are being
issued
Base rate is set equal to average of cut-off yield in the
preceding 03 auctions of 364-day T-bills with annual
resetting.
G-Sec Measures of Reforms
Auction
With the introduction of auctions, the rate of interest
(coupon rate) gets fixed through a market based price
discovery process.
At time of initiation of reform process, IR were
administeredgap b/w real and nominal IRs...
Measures of reforms aimed at avoiding this of
distortionthis is why auction!!!
IR turned reflective of market forces and helped in
better allocation of resourcesturns as an anchor
rate for FIs.
An auction may either be yield based or price
based..RBI goes for yield based
G-Sec MarketTypes of Auctions
Yield Based Auction:
Generally conducted when a new Government security is
issued.
Investors bid in yield terms up to two decimal places (for
example, 8.19 per cent, 8.20 per cent, etc.).
Bids are arranged in ascending order and the cut-off yield is
arrived at the yield corresponding to the notified amount of
the auction.
The cut-off price/yield is taken as the coupon rate for the
security.
Successful bidders are those who have bid at or below the
cut-off price/yield.
Bids which are higher than the cut-off price/yield are rejected.
G-Sec MarketTypes of Auctions
Illustration: Yield based auction of a new security
Maturity Date: September 8, 2018
Coupon: It is determined in the auction (8.22% as shown in
the illustration below)
Auction date: September 5, 2008
Auction settlement date: September 8, 2008*
Notified Amount: Rs.1000 crore