The government on Tuesday sold bonds worth 10.4 trillion rials ($45 million) in the first auction held by the Central Bank of Iran.
Buyers were mainly retail and institutional traders in the bourse with investment funds making a small contribution.
Stock market investors bought 9.9 trillion rials ($43m). One bank and an investment fund put in bids worth 1.87 trillion rials at the interbank trade platform but the Economy Ministry only accepted the bid from the bank worth 473 billion rials.
As per procedures, investors need to put in bids for a minimum of 500 bonds each at par value of 1,000 rials at the interbank auction platform managed by the CBI plus the trade platform of Tehran Securities Exchange Technology Management Company.
The bonds mature in October 2022 at 20.82%, according to a press release posted on the CBI website and were worth 250 trillion rials ($1 billion). The CBI said it will repeat the auction on next Tuesday (June 1) to sell the remaining bonds worth 240 trillion rials.
Bond offers at weekly intervals are to help finance the budget and are in line with provisions of budget law.
Bond auctions for the first time were held in May 2020 when banks and investment funds were forced to allocate a significant portion of their financial resources to buy government bonds. Later other institutional investors and retail traders joined but their contribution was unimpressive.
Last year the government held 42 auctions until the fiscal year ended in March and earned 1,257.4 trillion rials ($5.4 billion).
Economists say funding budget deficits via the bond market is comparatively safer than the government borrowing from the central bank, which runs the risk of expanding the monetary base and fueling inflation.
In addition bond offers help the CBI implement open market operations to regulate interest rates and maintain discipline in the interbank market.
In the OMO framework, selling bonds to banks and credit institutions enable them to get credit by putting bonds as collateral with the CBI. In tandem with bond auctions OMOs implemented every week.
The CBI said this week three banks borrowed short-term credit worth 89.2 trillion rials ($385m) by putting bonds as collateral.
