Government Securities

Treasury Bills, first issued in 1986, are issued on the basis of price auctions in the form of discount notes.

• The issue amount is decided by the Ministry of Finance and National Economy (MOFNE) each year in advance.
• The Central Bank of Bahrain issues the following T-Bills with three different maturities:
• Three-month (91 days) treasury bills are issued on a weekly basis.
• Six-month (182 days) treasury bills are issued on a monthly basis.
• Twelve-month (364 days) treasury bills are issued on a monthly basis.

Treasury bills are issued through a variable-rate auction procedure where all eligible retail banks, the Social Insurance Organisation, wholesale banks and other central banks are invited to participate. Individuals and investment institutions & companies can participate through their retail banks or Bahrain Bourse.

The auction procedure is as follows:

• The CBB notifies all eligible participants about the forthcoming issue.
• Tenders are then allotted according to price/yield until the issue amount is exhausted.
• The CBB notifies the participating institutions about the individual result of the tender allotment.
• The CBB issues a press release with information about the allotment result, which includes the issue number, issue date, maturity date, amount allotted, lowest accepted price and average interest rate. This information is also posted on the CBB pages on Reuters and Bloomberg.

The settlement of the resulting transactions takes place through debiting the participating banks accounts with the CBB. The issue date is normally two business days after the tender date.

• The CBB offers depository and settlement services for the holders of government securities.

Treasury bills are eligible as collateral for repo transactions with the CBB, i.e. retail banks can borrow funds from the CBB overnight against their outstanding holdings of treasury bills as collateral.

• The CBB issues local and international long term Government Development Bonds upon the request of the MOFNE, denominated in U.S. dollar or Bahraini Dinars. They are issued on an ad hoc basis and have a maturity of 2 to 30 years.
• The local Government Bonds were first issued in 1977.
• The local Government Development Bonds are issued through a fixed-rate tender procedure. The coupon rate is set by the Central Bank of Bahrain – Monetary Policy Committee. All domestic retail banks, the Social Insurance Organisation, insurance companies, Bahrain Bourse and other central banks are invited to participate. Individuals and investment institutions & companies can participate through their retail banks or Bahrain Bourse. The auction procedure is as follows:
• Invitation letters, including details on the forthcoming issue, are circulated to the institutions entitled to participate in the tender.
• The institutions submit a tender bid to the CBB, indicating the quantity they would like to acquire.
• Tenders are then allotted pro-rata to institutions according to their quantity contributions.
• The CBB notifies the participating institutions about the individual result of the tender allotment.
• The CBB issues a press release with information about the allotment result, including, issue number, issue date, maturity date, amount allotted, coupon rate, payment frequency and total tenders received. This information is also posted on the CBB pages on Reuters and Bloomberg.
• The settlement of the resulting transactions takes place through the debiting of the participating banks – accounts with the CBB.
• The coupon payments are paid to the investors semi-annually.
• The Government Bonds are eligible as collateral for repo transactions with the CBB, retail banks can borrow funds from the CBB overnight against their outstanding holdings of bonds as collateral.

Sukuk AlSalam, first issued in June 2001, is a BHD-denominated debt instrument issued in accordance with Sharia standards.

Al Salam Sukuk are issued on a monthly basis and have a three-month (91 days) maturity.

Sukuk AlSalam is an instrument representing real commodities (Residual Gas), which is considered as a liability sold against deferred delivery.

These securities are based on sale and purchase contracts which are processed, agreed upon and signed. These securities are collateralised by a commodity (Residue Gas).

• The Government of Bahrain undertakes to sell commodities to be delivered in the future to the investors for advance payment in the value of securities issued.
• The investor will receive the proceeds arising from the sale of commodities to an independent party (third party) who is completely and partially different from the seller, at a price exceeding the forward buying price.
• Al Salam Sukuks are issued through a fixed-rate tender procedure. The rate of return is pre-set by the Monetary Policy Committee.

All domestic retail banks, the Social Insurance Organisation, selected wholesale banks and other central banks are invited to participate. Individuals and investment institutions & companies can participate through their retail banks or Bahrain Bourse.

 The auction procedure is as follows:

• The CBB notifies all eligible participants about the forthcoming issue. The institutions submit a tender bid to the CBB, indicating the quantity they would like to acquire.
• Tenders are then allotted pro-rata to institutions according to their quantity contributions.
• The CBB notifies the participating institutions about the individual result of the tender allotment.
• The settlement of the resulting transactions takes place through the debiting of the participating banks accounts with the CBB. The issue date is normally two business days after the tender date.
• The CBB issues a press release with information about the allotment result, including the issue number, issue date, maturity date, amount allotted, expected return and total tenders received. This information is also posted on the CBB pages on Reuters and Bloomberg.
• The CBB has decided to appoint one of the Islamic Retail Banks to act as a representative on behalf of all the participating institutions and sign the contracts.

• Short term Ijara Sukuks, first issued in August 2005, are a BHD-denominated leasing instrument issued in accordance with Sharia standards.
• Short term Ijara Sukuks are issued on a monthly basis and have a six-month (182 days) maturity.
• Ijara Sukuk are instruments based on leasing contracts for an asset owned by the Government of Bahrain. The MOFNE chooses the asset which is to be used for the issue.
• In issuing Ijara Sukuk, the Government of Bahrain sells an asset to the investors, who will buy and own it before renting back to the Government at a predetermined rental rate, via a rental contract.
• The Government will also issue a binding promise to buy back the asset at its par value at the end of the rental period.
• Short Term Ijara Sukuks are issued through a fixed-rate tender procedure. The rate of return is pre-set by the Monetary Policy Committee.

All domestic retail banks, the Social Insurance Organisation, selected wholesale banks and other central banks are invited to participate. Individuals and investment institutions & companies can participate through their retail banks or Bahrain Bourse.

The auction procedure is as follows:

• The CBB notifies all eligible participants about the forthcoming issue.
• The institutions submit a tender bid to the CBB, indicating the quantity they would like to acquire. Tenders are then allotted pro-rata to institutions according to their quantity contributions.
• The CBB notifies the participating institutions about the individual result of the tender allotment.
• The CBB issues a press release with information about the allotment result, including the issue number, issue date, maturity date, amount allotted, expected return and total tenders received. This information is also posted on the CBB pages on Reuters and Bloomberg.
• The settlement of the resulting transactions takes place through the debiting of the participating banks accounts with the CBB. The issue date is normally two business days after the tender date.
• CBB has a Centralised Shari’ah Board, which reviews the procedures undertaken with the issuance of Islamic Leasing Securities in the form of a Fatwa.

The CBB has decided to appoint one of the Islamic Retail Banks to act as a representative on behalf of all the participating institutions and sign the contracts.

• Ijara Sukuks are a leasing instrument issued in accordance with Sharia standards. Long Term Ijara Sukuks are denominated in U.S. Dollar or Bahraini Dinars. The CBB issues local and international long term Ijara Sukuks on an ad hoc basis (upon the request of the MOFNE) with a maturity of 2 – 10 years.
• The Local Long Term Ijara Sukuks were first issued in September 2001. They are issued through a fixed-rate tender procedure.

The coupon rate of return is pre-set by the Monetary Policy Committee.

All domestic retail banks, the Social Insurance Organisation, the insurance companies and other central banks are invited to participate.

• Ijara Sukuk are instruments based on leasing contracts for an asset owned by the Government of Bahrain. The MOFNE chooses the asset which is to be used for the issue.
• In issuing Ijara Sukuk, the Government of Bahrain sells an asset to the investors, who will buy and own it before renting back to the Government at a predetermined rental rate, via a rental contract.
• The Government will also issue a binding promise to buy back the asset at its par value at the end of the rental period.

The auction procedure is as follows:

• Invitation letters including details on the forthcoming issue are circulated to the institutions entitled to participate in the tender.
• A prospectus is prepared for the issuance, which gives details on the issue amount, currency, rental rate of return, asset used, issue date and the maturity date.
• The institutions submit a tender bid to the CBB indicating the quantity they would like to acquire.
• Tenders are then allotted pro-rata to institutions according to their quantity contributions.
• The cutoff time for receiving bids is 11:15 a.m. on the tender date.
• The CBB notifies the participating institutions about the individual result of the tender allotment.
• The CBB issues a press release with information about the allotment result, including, issue number, issue date, maturity date, amount allotted, expected rental return, payment frequency and total tenders received. This information is also posted on the CBB website, Reuters and Bloomberg pages.
• The settlement of the resulting transactions takes place through the debiting of the participating banks accounts with the CBB.
• On the date of the rental return, the CBB will transfer the rental return amount to the participating institutions’ respective accounts (semi-annually).
• The short and long term Bahraini Dinar denominated Ijara Sukuks are eligible collateral for Islamic Sukuk Liquidity Instrument (ISLI) with the CBB i.e. retail banks can borrow funds from the CBB for 1-week against their outstanding holdings of Ijara Sukuk as collateral.
• CBB has a Centralised Shari’ah Board, which reviews the procedures undertaken with the issuance of Islamic Leasing Securities in the form of a Fatwa.