MONEY MARKET INSTRUMENTS
This shows that for this T-bill the discount rate will be 6% .
HOW T-BILLS ARE TRADED IN PAKISTAN?
“At start, Treasury bills were issued on ‘tap basis’ for six months at 6percent per year. Afterwards when the government moved to a market-based system as part of the process of economic deregulation,disinvestment, and decentralization in April 1991 then the followingchanges were made:
Introduce the American-style auction-based system.
The role of primary market restrict to fortnightly auctions, instead of “on tap,” allowing for the development of a secondary market.
Primary dealers were appointed.”Information taken from (Naz Chohan 1991)State Bank of Pakistan use following two methods to trade T-bills.
Open Market Operations(OMO)
Only primary dealers can participate in the auctions and OMOs.•All the commercial banks (having account with SBP)•NBFIs (Non Banking Financial Institutions)If the primary dealer wants to buy a T-bill, must submit a bid that isprepared either;
Competitively The Non-competitive bids are normally submitted by the small investorswho agree to accept the price determined by the auction.