Aversion to government bonds was visible at the auction on Tuesday for the eight straight round.
The government hardly sold 1.4 trillion rials ($5 million) to investors out of the total 48 trillion rials on offer.
Four banks put in bids worth 4.4 trillion rials but the Economy Ministry approved 998 billion at 21.3% for three-year maturity and 378.2 billion at 20.4% for bonds with two-year maturity.
Bonds had a similar fate in the stock market as only 745 million rials in bonds were sold, according to a press release on the Central Bank of Iran website.
Despite the cold reception, the CBI doubled the value of bonds to 82.5 trillion for the next auction on Nov.24
Starting since May, the auctions are held by the CBI to raise funds to help the government meet its budget commitments. In dire need of new sources of funding, the government has tried but failed to find buyers for its debt in the past several weeks.
Despite success in the first few auctions, sales have plunged sharply in recent weeks. This was the eighth weekly government auction that failed to attract big investors.
Low yield on bonds and high inflation expectations are seen as the main reasons behind the aversion to invest in fixed income assets.
Experts say the government needs a minimum 50 trillion rials a week to finance budget spending. It has sold less than 4 trillion rials a week in the past two months.
So far the government has generated 730 trillion rials ($2.7 billion) in 25 weekly bond offers. Experts say it needs to sell an additional 520 trillion rials before the fiscal year is out in March 2020.
Struggling to attract buyers, the Economy Ministry said earlier in the week that equity market investors can henceforth buy bonds issued by the government throughout the trading week, instead of only once in a week.
"The move is line with measures to finance government spending via bonds and improve the participation of investors," the ministry said.
