What is Uniform cut-off yield and how is it computed?
Uniform cut-off yield is applicable only to the auction market and it refers to allotment of bids at a uniform cut-off yield. The same rate is made applicable across all successful borrowers and lenders. In the auction market, all the bids of the respective CBLOs are arranged in ascending order of their yields. In case there are two identical bids (in terms of yield), they are arranged on time priority basis. The cut-off yield is the rate at which the total bid amount is equal to the total offer amount. The allotment at cut-off yield in respect of identical bids will be on the basis of time priority.
