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Kathmandu Wednesday July 25, 2001 Shrawan 10, 2058.
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TBs over-subscribed by three times
Post Report
KATHMANDU, July 24 - The 91-day Treasury Bills (TBs) for the
week were over-subscribed by over three times indicating the prevalence of excess
liquidity in the market. The total bid amount for the week touched Rs 2.31 billion,
against the call for sale of TBs worth Rs 700 million.
The bid amount for the TBs last week had fallen short of the
call for subscription and Nepal Rastra Bank (NRB), the central bank of the country that
issues the TBs on behalf of the government, had to purchase the unsold TB at the
prevailing market rate.
The NRB sold the TBs to eight bidders Tuesday, mostly
commercial banks, out of the total 37 bidders. The TBs, which are sold at a discounted
price and redeemed at the face value, are issued every Tuesday by the central bank at the
rate determined by the market forces.
The discount rate for the TBs this week was higher in
comparison with that of the last week. This week’s rate climbed by 0.0286 per cent to
touch 4.9644 per cent, up from the last week’s rate of 4.9358 per cent. The discount
rates in the previous two weeks had been 4.9521 per cent and 4.9547 per cent respectively.
The Open Market Operation Committee (OMOC), under the NRB
this week has approved for the issuance of TBs worth Rs 751 million for next week (July
31). As always, the bidders are required to submit their bids by Monday and the buyers
would be selected the same day, leaving the actual transfer of TBs for the next day.
The TBs are sold to those who offer the lowest discount rate
for the purchase. However, the OMOC has the right to reject the bid proposals if it
suspects of interest manipulation and the rates offered is either too low or too high as
compared to the normal market rates.
The TBs are considered to be the most secure investment, in
which the default risk is considered to be practically non-existent. They are one of the
most important government monetary instruments, widely used to cover irregular short term
deficits. TBs are also one of the powerful instruments of any central bank to regulate the
Monetary Policy.
Out of the total floated TBs, competitive forces can purchase
a maximum of only 85 per cent of the TBs. The remaining 15 per cent is reserved for
non-competitors. Only individuals and non-banking institutions are entertained to procure
the TBs under the non-competitor facility.
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