After a strong performance last week, bonds issued by the government to fund the budget were well-received by investors this week.
The government generated 108.9 trillion rials ($403 million) selling bonds to banks as well as retail and institutional investors in the stock market, according to the Central Bank of Iran website.
Almost all bonds were bought with the majority purchased by underwriters and banks. Three banks bought 22.8 trillion rials ($84m) of the debt.
The remaining bonds were bought by stock market investors, among them Lotus Parsian Investment Bank (LPIB), an investment bank listed with the Tehran Stock Exchange.
LPID published a note on Codal website saying “it has undertaken a new financial commitment by participating in buying standard Salaf Securities backed by crude oil”.
The company bought 2.97 trillion rials ($11m) worth of salaf bonds, according to Codal.ir, a platform where listed companies post their financial reports.
The weekly bond sale brought the total to 430 trillion rials ($1.6 billion) in 18 sessions since May. A week before bonds worth 132.5 trillion rials ($490m) were sold.
Investors stayed away from the debt offers for several weeks for reasons such as low yields and long maturity dates. The Economy Ministry adjusted trade conditions to attract investors.
Up until last week, the type of bonds sold by the government were Islamic Murabaha Sukuk. This week it was standard salaf securities backed by Iranian crude oil sold by the Economy Ministry on behalf of the government.
Standard parallel salaf is an Islamic contract similar to futures with the difference being that the total price should be paid in advance.
To sweeten the debt offers, the government shortened maturity dates and increased yields. The maximum yield the Economy Ministry offered earlier was slightly over 21% with 3-year maturity.
In the last auction it offered 20.7% to banks and 21% to stock market investors for bonds that mature next September and scrapped bonds with longer maturities.
Earlier the CBI Governor Akbar Komijani underscored the need to make the debt market attractive to investors. He expressed concern over methods of funding the government’s deficit spending, noting that selling debt to compensate the deficit should gain pace.
Opening a primary interbank market for bond auctions is a CBI initiative launched in May 2020 to help the government raise funds for budgetary needs as it struggles with bigger deficits due to the US economic blockade, in particular sanctions on oil export -- the lifeline of the economy.
Highlight: The majority of the debt was bought by underwriters and banks. Three banks bought 22.8 trillion rials ($84 million) of the debt. The remaining bonds were bought by stock market investors
Caption: Investors stayed away from the debt offers for several weeks.
