Japan Securities Dealers Association (JSDA) recently announced guidelines to introduce “when-issued transactions” of Japanese Government Bonds (JGB), which allows market participants to deal JGB trades earlier than the issuing day and execute the settlement on or after the issuing date. The guidelines will be enforced from 23 February 2004.
JGB s eligible for when-issued (or “grey market”) transactions are principally the JGBs sold by tender. The tender-offer date, amount to be issued, issuing date and redemption date are all announced prior to the bid date.
For fixed-rate JGBs , the trade should be traded on a semi-annual compound rate basis, according to the guidlines. Floating-rate JGB trades, adds JSDA, should use the sum of a benchmark interest rate to be designated and a certain spread. In addition, the delivery of JGB s should be executed on the originally scheduled issuing date.
Where a JGB issue is cancelled or postponed, when-issued transactions of JGB that have been traded will be cancelled. Similarly, if a tender-offer of JGBs is cancelled and the announcement that the issuance of JGB has been cancelled, when-issued transactions of JGB will be canceled.