MGS SWITCH AUCTIONS OF RM3.1 BLN CONDUCTED TO INCREASE LIQUIDITY - BNM

KUALA LUMPUR, Sept 22  -- Switch auctions worth RM3.1 billion of Malaysian Government Securities (MGS) have been successfully conducted today, which would enhance liquidity and consolidate the number of bonds.

The switch auctions reduced the outstanding amount of the MGS09/28 and MGS04/32 to below RM4 billion while simultaneously reopening the more liquid MGS05/35, MGS09/43 and MGS07/48, it said on its website.

MGS with stock codes of MX080003 and MX120004 were repurchased at RM1.2 billion and RM1.91 billion, respectively, after which the post-switch outstanding amount of both stocks are reduced to RM3.84 billion and RM3.58 billion, respectively.

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These were then replaced with stock codes MY150004, MZ130007 and MZ180005, with the amount reopened at RM447 million, RM1.22 billion and RM1.44 billion, respectively.

Post switch, the three stocks’ outstanding value now stands higher at RM7.6 billion from RM7.16 billion previously, RM7.72 billion from RM6.5 billion and RM10.94 billion from RM9.5 billion, respectively.

MGS switch auction involves the government buying back or redeeming certain predetermined MGS that tend to be illiquid and to replace them with more liquid benchmark MGS.

The main objective of the switch auction is to enhance liquidity in the bond market by increasing the size of on demand MGS and reducing the outstanding amount of off-the-run MGS. 

It also provides the government with more flexibility to manage its liability through the re-profiling of debt.

At the same time, switch auctions could also be used to cater to investors' demand for securities of a certain duration.

-- BERNAMA