A defined group of primary dealers is allowed to participate in auctions of Austrian Government Bonds and Treasury Bills. The procedure is processed by the OeKB as the Auction Agent with the special software ADAS (Austrian Direct Auction System) and is regulated clearly.
Price auctions for tap issues
Both price and yield auctions are possible for the issue of Austrian government bonds.
In order to increase the liquidity of the individual issues and close gaps in the maturity range, only one to two new bonds are issued each year. Auctions for tap issues are held monthly. Price auctions are held for tap issues.
In recent years, new issues have been made without exception by means of syndication, i.e. through syndication. They could also be issued with an auction. Yield auctions are provided for this.
For the issue of Austrian Treasury Bills (ATB) yield auctions are used.
Dates and timings fixed
At the end of the year, the issuer announces non-binding auction dates for the following year which will be published in the auction calendar.
One week before the auction, the parameters of the issue, the planned issue volume and information about submitting bids will be sent to all primary dealers via ADAS, fax and email and published in the news section of the OeKB website.
In parallel auctions - the auctioning of several government bonds on a single auction date - the issuer can only announce the total issue volume and decide on the individual issue volumes on the basis of the bids received.
The auction procedure in detail
|
Thursday (T -5) |
Maturity recommendation of the primary dealers. (only in case of government bonds) |
|---|---|
|
Tuesday (T) |
End of the competitive auction and immediate |
|
Wednesday (T +1) |
End of the non-competitive auction and immediate publication of the overall results. |
|
Thursday (T +2) |
Settlement |
Maximum-possible transparency in the auction procedure as a goal
The announcement of the auction dates at the beginning of the year, the announcements of issues and the rule-based sequence of the auction procedure are examples of the efforts made by the issuer to enhance the transparency of the entire issue procedure both for investors and for the banks involved.
Rules and process of the competitive procedure
The approved primary dealers are required to make a competitive bid; the possibility to make a non-competitive bid then exists as an incentive to perform.
The competitive submission phase begins on the auction day at 10:00 CET and ends one hour later at 11:00 CET. To create equal opportunity amongst the participants, the time is stipulated by ADAS.
- Bids can only be submitted in ADAS (Austrian Direct Auction System).
- Individual bids must have a nominal value of at least one million euros or multiples thereof and contain the price at which the bidder is prepared to purchase the respectively offered nominal amount of government bonds (in case of ATBs a yield tender is employed).
- Multiple bids are permitted.
- The bids can be changed as often as required until the close of the submission period.
- The minimum bid amount per bank and auction day corresponds to the competitive issue volume announced by the issuer divided by the number of auction participants.
To avoid bidders making mistakes with their submissions and to ensure the limits mentioned above, ADAS checks the plausibility of the bids in real time.
Information about allotments via ADAS immediately after confirmation by the issuer
The bids are ranked according to the amount of the prices bid, starting with the highest price. Competitive bids are allocated at the price bid (“multi-price auction”). Pro-rata curtailments in the bids that were made at the lowest accepted price (cut-off-price) are possible in order to be able to precisely achieve the planned, competitive issue volume.
In case of ATBs competitive bids are allotted at the cut-off-yield (“uniform-price auction”).
OeKB makes individual information about allotments - nominal value, price, amount payable, etc. - and the overall result available to the auction participants immediately after the end of the submission period and confirmation by the issuer. The results are therefore available to the auction participants within a few minutes of the close of the auction.
Withdrawal possibility for the issuer
The issuer can withdraw the entire issue up to 12:00 CET on the day of the auction. In this case, a new auction will be scheduled for one week after the cancellation. However, since the introduction of the electronic auction system in 1998, only one issue has been withdrawn by an issuer.
Rules and process of the non-competitive procedure
20 % of the competitive issue volume of government bonds (15 % in case of ATB-auctions) is additionally made available to the auction participants after the competitive procedure for non-competitive bids.
Banks have the right to place non-competitive bids via ADAS up until 16:00 CET on the day after the auction at the average price of the competitive allotments (cut-off-price in case of ATBs). The entitlement of the individual auction bank is based on the weighted average of competitive allotments (in %) of the preceding two auctions and in accordance with established secondary market criteria.
Settlement
The settlement is processed by OeKB CSD GmbH.
Electronic auction procedure via ADAS
The entire auction procedure is processed electronically via ADAS (Austrian Direct Auction System). With this special software developed by OeKB, the results can be released immediately after the end of the competitive submission deadline and after confirmation of the results by the issuer.
