Investors showed some renewed interest in government bonds at the weekly auction after having shunned the debt market for months.
In the sixth round of auctions in the current fiscal year that started in March, the government sold debt worth 15.8 trillion rials ($63 million), the majority of which was bought by banks.
Bidders were three banks for 13.9 trillion rials ($55.6m), according to a press release seen on the Central Bank of Iran website. The regulator holds the weekly auctions on behalf of the government.
Institutional traders bought 1.9 trillion rials. Their contribution to bond purchase was zero in the last four auctions.
The bonds mature in October 2022 at 21% payable every six months. The CBI said it will offer 203 trillion rials ($812m) in bonds on July 6.
Investors must put in bids for a minimum of 500 bonds each at par value of 1,000 rials via the interbank platform managed by the CBI as well as the trade platform of the Tehran Securities Exchange Technology Management Company.
The bond sales help the government plug its budget deficits. As opposed to the successful experience in the last fiscal year, this year the government is facing big challenges borrowing from the debt market.
Economic experts say under the present conditions the Rouhani administration will either have to increase the yield to attract bond buyers or keep the money printing machines running as the budget deficit has grown to historic highs due to falling oil revenues as a result of the US economic blockade and pain inflicted by the coronavirus pandemic.
Majlis Research Center estimated that the budget deficit for the current fiscal year is at 3,200 trillion rials.
The latter option will give rise to inflation already among the highest in the world. The former alternative may run the risk of harming parallel asset markets, namely the bourse that has been struggling to stay afloat since last summer.
The initiative to offer bonds was launched in May 2020 when 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 ($5.4 billion).
