The eighth weekly bond auction held Tuesday by the government in the present fiscal year was again disregarded.
Selling debt has to some degree helped the government plug its deficit holes. Contrary to the successful experience in the last fiscal year, this year the government is facing big challenges raising funds from the debt market.
Since inception in late May, this is the third time investors have shunned the debt market and overall bond sale is remarkably lower compared to last year.
The government barely sold 50 trillion rials ($208 million) in bonds in the past eight auctions, down 88% compared with eight auctions last year, according to Eqtesad News website.
The website pointed to the low yield and long maturity dates as the two main reasons behind the government’s failure to attract buyers, warning about high inflation unless the government finds ways to fund the budget. The government is said to be in the red by about 3,200 trillion rials ($13 billion) this year.
Bond sale this week was worth 197.5 trillion rials ($790 million) with 21% yield and mature in July 2023 and June 2024.The CBI said it will repeat the auction next week.
Bond offers started in May 2020 when banks, investment funds and stock market investors were asked to take part. Last year the government held 42 auctions and generated 1,257 trillion rials ($5.4 billion).
The Rouhani administration has opted to sell bonds for deficit spending instead of borrowing from the central bank, which has been one of the main drivers of exploding money supply and inflation.
