Investing in Government Securities: What You Need To Know – Part 01

Primary Market

Information on auctions for Treasury Bills and Treasury Bonds are published in newspapers at least two days prior to the auction date.

In the case of Treasury Bills, newspaper advertisements relating to auctions are generally published on Mondays and the auctions are held on Wednesdays (if it is not a public holiday). Bids are accepted through the fully automated electronic bidding facility.

Treasury Bills are issued weekly, while 3-4 Treasury Bond auctions are held every month based on the Government’s cash requirement.

The deadline for submission of bids for the auction by Primary Dealers is 11 a.m. on the auction date. The successful bidders are informed within two hours of the deadline for the submission of bids. Auction results are released to the market and published on the CBSL website.

Settlement of successful bids in the primary market is on two business days after the auction date (T+2). Sri Lanka Government debt securities are scripless and therefore transfers of securities take place in an electronic system. Settlement is via the Scriptless Securities Settlement System and the Real Time Gross Settlement System on a Delivery vs. Payment basis (DVP).

Investors are required to maintain accounts with Licensed Commercial Banks or Primary Dealers for cash settlement for their transactions as well as for the crediting of coupon payments. Ownership of the securities is recorded in the Central Depository System maintained by the Central Bank of Sri Lanka.

Secondary Market

An investor can either hold a tradable security until maturity or sell in the secondary market prior to maturity at the market price. Investors can buy tradable securities in the secondary market. Primary Dealers/Licensed Commercial Banks quote buying and selling prices of Treasury Bills, Treasury Bonds on a daily basis for different maturities.

Treasury Bills and Treasury Bonds are held in scripless form and the securities transfer is done on an electronic basis. In the Scripless Securities Settlement System and the Real Time Gross Settlement System, transfer instructions are carried out on a trade-by-trade basis, with the transfer of securities and the transfer of funds for payment taking place simultaneously in an electronic system. In the Scripless Securities Settlement System transfer instructions are carried out on a trade-by-trade basis, with the transfer of securities and the transfer of funds for payment taking place simultaneously on a Delivery vs. Payment basis.

Primary Dealers

A primary dealer is a specialized intermediary in the government securities market, appointed by the CBSL under the Local Treasury Bills Ordinance, No 8 of 1923 and the Registered Stock and Securities Ordinance No. 7 of 1937. The main purposes of the primary dealer system include strengthening the primary market by, (a) helping to build stable, dependable source of demand for securities by effectively participating in the primary auctions conducted by Central Bank of Sri Lanka, (b) providing liquidity in the secondary market, (c) building distribution channels (to act as intermediaries) and, (d) providing market information, including prices, volumes and spreads between bids and offers.

 

Source : http://www.cbsl.gov.lk/htm/english/07_af_2pdm/pdm_2.html#2_1