In a move to encourage more trading in the secondary market, the
Bank of Uganda Monday announced it will sell treasury bills and bonds
at the same rate to both competitive and non-competitive bidders.
The move is a departure from the current method of multiple pricing.
In the single price method, securities in the primary auction will be sold at the same price.
“The
single price to each specific security will be the highest interest
rate from the accepted bids in the auction,” the central bank said.
Competitive
bidders are investors with bids above Ush200 million (about $53,500),
while the non-competitive bidders bid amounts between Ush100,000 and
Ush200 million (about $30 - $53,500).
Currently,
competitive bidders are allocated securities at the prices in their
respective bids, whereas the non-competitive bidders’ allocations are
done at the weighted average price of the successful competitive bids in
an auction.
But under the new method, both bidders
will be allocated securities at the same rate and which will be the
cut-off price of an auction.
“The new method will
encourage secondary market trading because selling may not disadvantage
investors as all would have received the same price at the primary
auction,” BoU said.
The single price method is also
expected to simplify computation of withholding tax on the interest
earned from government securities.
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