Central Bank bills auctions

The main function of this instrument is managing the liquidity of the banking system through selling short-term securities by the National Bank, on the primary market. The interest rate on the CB bills is the key interest rate, which determines the monetary policy stance.

CB bills auctions are conducted in regular intervals, and the amount of CB bills sold is determined depending on the short-term liquidity projections (on a longer term it depends on the monetary policy projection). All banks are entitled to participate in the auctions.

The maturity of the CB bills is 28 or 35 days, depending on the duration of the fulfillment period of the reserve requirement, which is in line with the monthly sequence of changes of the autonomous factors (government deposits, currency in circulation).  Depending on the needs for managing the liquidity of the banking system, National Bank may apply other maturities of the CB bills.

National Bank applies two main types of tenders in the CB bills auction:

a) Interest rate tender: in the prospectus sent to the banks, National Bank announces the amount of CB bills offered for sale, and the banks bid with amounts and interest rates;

b) Volume tender: in the prospectus sent to the banks, National Bank announces fixed interest rate at which CB bills will be offered for sale, and the banks bid only with amounts. 

CB bills may be traded on the secondary market and they serve as a collateral for credits from the central bank.