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RBI to issue g-sec of shorter tenor, floating rate bonds via uniform price auction method

For other benchmark securities, i.e. 30-year and 40-year, the auction will continue to be a multiple price based auction.Premium
For other benchmark securities, i.e. 30-year and 40-year, the auction will continue to be a multiple price based auction.

  • On a review of market conditions and market borrowing program of the government, it has been decided 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 using uniform price auction method, RBI said

The Reserve Bank of India on Friday said the benchmark government securities (g-sec) of various tenor and floating rate bonds (FRBs) will be issued using the uniform price auction method.

“On a review of market conditions and market borrowing program of the government, it has been decided 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 using uniform price auction method," the RBI said in a release on Friday.

For other benchmark securities, i.e. 30-year and 40-year, the auction will continue to be a multiple price based auction.

In a uniform price auction for issuing government securities, all the successful bidders are required to pay for the allotted quantity of securities at the same rate, i.e., at the auction cut-off rate, irrespective of the rate quoted by them.

On the other hand, in a multiple price auction, the successful bidders are required to pay for the allotted quantity of securities at the respective price/yield at which they have bid.

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