The government sold 29.1 trillion rials ($121 million) in bonds at the weekly auction held by the Central Bank of Iran on Tuesday.
It was the highest earning in the fourth quarter of the fiscal year starting on Dec 21 and 50% higher than the sale last week.
Four banks and credit institutions put in bids worth 16 trillion rials ($66m) in the interbank market. Underwriters were the next buyers. As per CBI data, the security underwriters bought bonds worth 13 trillion rials ($54m) accounting for almost 45% of the total. The share of retail and institutional investors was zero in this week's auction.
Bonds on offer totaled 83 trillion rials ($345m) with yields from 20.5% to 21.5% with two-year and three-year maturities. The CBI said it will put up 67 trillion rials ($270m) at the next auction on Feb 9.
Starting last May, the auctions are among government measures to help plug its deepening budget deficits and were relatively successful in the first several rounds but plunged sharply with the start of autumn.
So far the CBI has held 36 auctions and generated close to 1,030 trillion rials ($4.3 billion) with average yields at 20%.
The government has also sold treasury bills worth 497 trillion rials ($2.2b) since last March, according to Economy Ministry data.
Addressing members of Fars Province Chamber of Commerce last week, the CBI governor Abdolnasser Hemmati hailed the role of bonds in reducing government dependence on the CBI for funding the widening budget gap and its ensuing impact on the ballooning money supply.
"If it was not for bonds, the money supply would have expanded by additional 5,600 trillion rials [$23.3b]," he told the chamber. Money supply has reached 31,300.2 trillion ($130b) the highest in the past six years, according to the CBI.
There are eight more weeks before the fiscal year ends on March 20 and the government is facing a 250-trillion-rial ($1b) deficit, according to the Persian-language economic website Eghtesadnews.
This means the government needs to sell at least 30 trillion rials in bonds by that time. This, however, seems a tall order given the current trends in bond trade in the debt market.
Banks have been asked to hold enough bonds to be able to operate in the interbank market and borrow from the CBI under the newly launched open market operation policy.
The CBI has asked banks to buy bonds to be eligible to borrow. The Money and Credit Council, the top monetary decision-making body, has obliged lenders to allocate at least 3% of their financial resources to bonds.
