After months of stress and absence of buyers, Tehran’s bond market is showing signs of coming back as investors of fixed income assets display renewed interest in buying government bonds.
In the latest auction held during the week ending August 22 by the Central Bank of Iran, the government sold 87.6 trillion rials ($340 million) in Islamic bonds, the highest weekly sale since the beginning of current fiscal year in March, the CBI website reported.
Majority of the bonds were bought by underwriters and investment companies while retail and institutional investors in the bourse plus banks came forward.
Underwriters bought 60 trillion rials ($230m) of the debt or 68% of the total. Bonds worth 18.5 trillion rials ($71m) were bought by four banks and stock market investors bought 9.1 trillion rials ($35m).
This time around the yield is 21.77% and 21.5% for bonds maturating in July 2023 and June 2024, respectively. The CBI said it will offer 140 trillion rials ($540m) in debt in the next session.
To plug its ballooning deficit holes the government started selling bonds in May via weekly auctions held by the CBI.
Government income from 12 auctions was around 167.6 trillion rials ($650m) -- way lower than its initial predication to generate 1,250 trillion rials ($4.8b) by the time the current fiscal year is out in March 2022.
Investors stayed away from the debt market for months due largely to low yields and long maturity dates plus “buyers troubles to cash the securities in the secondary market,” the CBI said.
The maximum yield the Economy Ministry has so far offered has been less than 22% for bonds in 2024 and later.
Given the mounting economic ills, long maturity dates combined with low yields do not appeal to investors of fixed income assets when the economy is saddled with 45% inflation.
Earlier, Abdolnasser Hemmati, the former CBI governor, voiced concern about the government’s fiscal policies and deep budget deficits. Bonds as a “sole noninflationary solution” for budgetary needs was not taken seriously by the government as had been anticipated, he said.
“Unable to sell debt, the CBI is facing pressure to create high powered money. This has to change without delay,” the senior warned earlier.
Bond sales started in May 2020 and 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 ($5b).
Highlight: Investors, the CBI said earlier, stayed away from the debt market for months due largely to low yields and long maturity dates plus buyers troubles to cash the securities in the secondary market
