The Bank of Mauritius (BOM) will sell new benchmark Three Year Government of Mauritius Treasury Notes (GMTN) through an auction on Wednesday, April 09, 2014, for a nominal amount of Rs 1.3 billion due for settlement by the next Friday.

It may be noted that, earlier this year, to counter excess liquidity, BOM, together with the Finance Ministry, set a target to mop up the excess money floating in the island economy by issuing Treasury Notes and government bonds aggregating Rs 34.9 billion to the public in 2014.

This issue of three year GMTN is in pursuit of the central bank’s goal to absorb the excess liquidity, which can lead to inflation, and erode the purchasing power of consumers.

The Treasury Notes will be issued on April 11, 2014 and will mature and be redeemed at par by the BOM on April 11, 2017.

In the event of oversubscription, the BOM may accept bids for amounts higher than Rs 1.30 billion at the weighted accepted yield.

Applications from individuals and non-financial institutions should be made through banks or licensed stockbrokers offering these services, where individuals will be able to submit applications in their own names or jointly with another individual; however, minors must be represented by a legal guardian.

Banks on the other hand, may submit their bids through the Reuters Dealing System.

Maturity proceeds and interests accruing on the Treasury Notes will also be paid by the Bank through the MACSS.

The coupon rate for this auction will be set equal to or higher than the lowest accepted yield of the auction to be held on April 09, 2014.

Hence, bidders whose accepted bids carry yields lower than the coupon rate will be required to pay a premium, whereas, successful bidders will in any case receive the yield that they specified in their bids.

Also, at its discretion the Bank may, may allow the Treasury Notes to be redeemed or converted into other instruments at market rates prior to maturity, where interest on these Treasury Notes will be paid half-yearly on October 11 and April 11 by the Bank during the currency of the Treasury.

Image (Central Banking): This issue of three year Treasury Notes for a nominal amount of Rs 1.3 billion is in pursuit of the central bank’s goal to absorb excess liquidity, which can lead to inflation and erode the purchasing power of consumers.

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