Primary Market

Government securities issued under Czech law are sold through the Czech National Bank (CNB) or, on the basis of an agreement between the Ministry of Finance and CNB, through a person who is authorized to perform such activity.
 
Government securities shall be sold onshore on the primary market principally by auction to primary dealers (PD) and recognized dealers (RD); i.e. persons that signed the Primary Dealer Agreement for Czech Government Securities or the Recognized Dealer Agreement for Czech Government Securities with the Ministry of Finance; or in the form of direct registration on the owner account of the Ministry of Finance.

Auctions for PD and RD shall be organized by the CNB. The auction venue shall be the CNB. The procedures and rules applied at the primary sale of government securities, i.e. medium-term and long-term government bonds (T-Bonds) and treasury bills (T-Bills) issued in the Czech Republic are governed by Rules for the primary sale of government securities organized by the Czech National Bank.

Primary auction of T-Bonds

PD and RD shall submit their bids to auctions of T-Bonds through the AUPD function in the Bloomberg system. The auction usually comprises of the competitive and non-competitive part.

Competitive part

• 100 % of the total nominal value of the respective tranche of T-Bond issue is offered.
• Unless stipulated otherwise, orders shall be submitted with the price given to two decimal places. 
• Sale of T-bonds is carried out by the American method; orders with a lower price than the minimum accepted price are rejected. Successful competitive bids are satisfied at the price at which they were submitted.

Non-competitive part

• 20 % of the total nominal value of all tranches of T-Bond issues offered in competitive parts of T-Bond auctions that auction day, is offered. This amount shall be allocated to the respective offered T-Bond tranches based on the results of the respective tranches in the competitive part of the T-Bond auction.
• The price of non-competitive part of the auction is determined as the weighted average of the prices of the satisfied competitive bids.

Harmonization of the Settlement Period on Primary Market

Commencing on 1 January 2015 all primary auctions are settled in CSD Prague as T+2. New settlement period was agreed with the representatives of Primary Dealers after previous agreement with the Czech National Bank and CSD Prague. New settlement schedule was presented at the Tenth Primary Dealer Committee Meeting held on 16 January 2015. First primary auctions of Medium-term and Long-term Government Bonds which were settled as T+2 took place on 11 February 2015 and were settled on 13 February 2015. Czech Republic fully harmonized the settlement period on the primary market of Government Bonds with other EU countries, building on the successful harmonization on the secondary market, which was commenced on 6 October 2014.

Primary auction of T-Bills

PD and RD shall submit their bids to auctions of T-Bills registered at the Central
Depository through the AUPD function in the Bloomberg system and bids to auction of T-Bills registered at the Short-Term Bond System (SKD) electronically through the SKD system.

• Unless stipulated otherwise, orders shall be submitted with the yield given to three decimal places.
• Sale of T-bonds is carried out by the Dutch or American method; orders with a higher yield than the maximum accepted yield are rejected.
• Successful bids shall be satisfied at the yield corresponding to the bid with the highest accepted yield in case of the Dutch method and at the yield corresponding to the submitted yield in case of the American method.