The weekly government bond auction on Wednesday held by the Central Bank of Iran again failed to impress with banks purchasing little in the absence of equity market investors.
Auctions are held by CBI on behalf of the Economy Ministry to raise funds for the government’s deficit spending. Buyers of debt normally are banks, credit institutions, investment funds and institutional investors.
The shortest maturity date for this week’s debt offer was May 2023 at 22.53%. According to a CBI report banks purchased 3.8 trillion rials ($8.8 million) during the 37th auction.
Banks mostly prefer short-term debt with lower yields while institutional investors are more inclined towards long-term debt with higher yields.
The previous auction also was not welcomed by investors. The last time government managed to sell bonds was three week ago when it barely generated 10,117 trillion rials ($24.9 million) from banks and credit institutions in the absence of retail and institutional investors.
The Economy Ministry said it will hold the next auction on February 8 to offer 47.5 trillion rials ($110.4m) in new debt maturing in November.
Bond auctions started in May 2020 when banks and investment funds were instructed by the CBI to allocate a part of their resources to this end. Later, institutional investors and retail traders in the stock market joined.
According to ministry data, 665.272 trillion rials ($1.63 billion) bonds have been sold since last March. In addition to bonds, the government has sold treasury bills worth 350 trillion rials ($991.5m) this year. Treasury bills are underwritten and given to contractors in lieu of unpaid bills.
In the last fiscal year that ended in March 2022 the CBI held 36 auctions generating 906 trillion rials ($3b) down 27% from the year before.
Debt is offered in line with provisions of the 2022-23 budget in which the government is allowed to offer 860 trillion rials ($2.8b) by March.
The ministry said recently that it paid the principal and interest on bonds worth 1,445.7 trillion rials ($3.56 billion) until November 4.
More than 1,079 trillion rials ($2.65b) was the principal and 366.061 trillion rials ($301.6m) interest -- it being over and above government income from new debt offered during the period.
