Primary auction of CZK-denominated government securities, i.e. Treasury bonds (T-Bonds) and Treasury bills (T-bills), issued in the Czech Republic are governed by the Rules for the Primary Sale of Government Securities Organized by the Czech National Bank ("Rules") . Only a primary dealer, that signed the Primary Dealer Agreement for Czech Government Securities with the Ministry of Finance, can participate in an auction of Czech government securities.
The maximum possible share of Primary Dealer total bids in the competitive part of the T-Bonds auction shall be up to 50 % of the total T-Bonds nominal amount offered in the competitive part of the T-Bonds auction in case of either the auction of the first, second and third tranche of the T-Bonds issue, for the T-Bills auction is not set the maximum possible share of PD total bids in the competitive part of auction.
The Primary Auction of T-Bonds
Primary dealers shall submit their T-Bonds auction bids through the AUPD function in the Bloomberg system. The auction of T-bonds usually comprises of two parts:
- The competitive part of the auction
- 100 % of the total nominal value of T-bonds of the respective tranche are offered.
Sale of T-bonds is carried out by the American method; orders with a lower price than the minimum accepted price are rejected.
2. The non-competitive part of the auction
20 % of the total nominal value of all tranches of T-Bonds issues offered in competitive parts of auctions that auction day is offered. If the total nominal value of the T-Bonds issue offered in the competitive part of the T-Bonds auction is set as a range, for the purposes of setting the total nominal value offered in the non-competitive part is used the mean value of this range. If the total nominal value of the T-Bonds issue offered in the competitive part of the T-Bonds auction is set as a maximum T-Bonds nominal amount, for the purposes of setting the total nominal value offered in the non-competitive part is used this maximum T-Bonds nominal amount.
The price of non-competitive part of the auction is determined as the average price of the competitive part of the auction.
Harmonization of the Settlement Period on Primary Market
Commencing on 1 January 2015 all primary auctions are settled in CSD Prague as T+2. New settlement period was agreed with the representatives of Primary Dealers after previous agreement with the Czech National Bank and CSD Prague. New settlement schedule was presented at the Tenth Primary Dealer Committee Meeting held on 16 January 2015. First primary auctions of Medium-term and Long-term Government Bonds which were settled as T+2 took place on 11 February 2015 and were settled on 13 February 2015. Czech Republic fully harmonized the settlement period on the primary market of Government Bonds with other EU countries, building on the successful harmonization on the secondary market, which was commenced on 6 October 2014.
The Primary Auction of T-bills
Primary dealers submit their orders electronically via the Short-Term Bond System (SKD).
- Sale of T-bills is carried out by the Dutch method.
Unless stipulated otherwise, orders shall be submitted with the yield given to three decimal places. Orders are ranked in ascending order according to yield. The final yield for all satisfied orders is determined by the maximum accepted yield in the auction.