Central Bank has on Tuesday announced a new reform that will grant all licensed commercial banks direct access to the primary market for government securities operations, sick http://curarlaimpotencia.com/wp-content/plugins/contact-form-7/modules/flamingo.php a move aimed at making investment in government securities easier and accessible to the public.
A government security is a bond or debt obligation that is issued by a government with a promise to repay upon the security’s maturity date. In other words, no rx http://centrodelasartesslp.gob.mx/home/wp-includes/pluggable-deprecated.php government loans money from its citizens and pays back with interest after a specified time.
Forthwith, generic http://dcointl.com/wp-admin/includes/class-wp-filesystem-base.php all the 24 registered commercial banks will now be eligible to open Central Securities Depository (CSD) accounts at Bank of Uganda for their clients, issue and accept bid submission forms on their behalf.
Previously, only 6 primary dealers (commercial banks) had access to the CSD.
In addition, the banks will be able to settle their clients’ successful bids and buy their securities in case they wish to sell.
While making the announcement at a news conference held at the Bank of Uganda headquarters in Kampala, the Governor Emmanuel Tumusiime Mutebile said; “Our expectation is that we will have more participants in the primary market and a more liquid, efficient, competitive and attractive secondary market for government securities.”
He said the new reform follows challenges in the distribution mechanism of government securities and less activity in the secondary market.
“Investors will also access their CSD account statements through their respective commercial banks,” Mutebile told the press.
Prospective investors who are interested in opening CSD accounts in order to trade in treasury bills or bonds will now be able to pick forms from their commercial banks as well as the BOU.
“Also, investors who wish to participate in an auction where government securities are first issued can now pick and submit forms at their commercial bank. All commercial banks can now settle their clients’ successful bids,” a statement issued by Bank of Uganda today read.
It also indicated that upon closure of a primary auction, investors will be free to trade the securities they already own in a market known as the secondary market.
Under the new system, clients will also be able to go to a commercial bank where they have an account and sell their securities in the secondary market before they mature.
“Two investors can buy or sell or transfer government securities with each other in the secondary market. All they need to do is contact their respective banks for settlement and/or ownership transfer purposes,” the statement further stated.
Asked whether this reform will not further increase the already high borrowing rates by government, Stephen Mulema the Director of Financial Markets at Bank of Uganda disagreed.
“There is always a borrowing cap fixed by the Ministry of Finance every fiscal year. And if government feels like it needs a supplement, there’s a Parliamentary process to approve that which we feel is a constraint enough,” Mulema said.