After a 2-month hiatus, the government’s weekly bond auction resumed Tuesday and was well-received by institutional buyers.
The government offered 100 trillion rials ($357 million) in debt of which 75.3 trillion rials ($268m) was bought by investors, according to a press release seen on the Central Bank of Iran website.
On behalf of the Economy Ministry, the CBI is in charge of offering bonds to banks and credit institutions in the interbank market, plus to retail and institutional buyers in the equity market.
The main buyers on Tuesday were retail and institutional traders in the stock market accounting for 87% or 66.1 trillion rials ($263m) of the total.
Three banks and credit institutions also put in bids worth 9.2 trillion rials ($32m). The bonds mature in August 2022 and November 2023 at 21.2% and 21.7%, respectively, with coupon payments every six months.
As per rules, investors should put in bids for a minimum of 500,000 bonds each at par value of 1,000 rials in the interbank auction managed by the CBI as well as the trade platform of the Tehran Securities Exchange Technology Management Company.
Despite the dire need to sell debt to plug the government’s deepening budget deficit, the CBI had suspended bond sales in mid-September.
The government generated a total of 440 trillion rials ($1.57 billion) from bond sale from May to September. The last auction was held on Sep.21.
Earlier the news media reported that the government had sought permission from the High Council of Economic Coordination to issues new debt. The council is an ad hoc economic decision-making body comprising heads of three branches of power.
The council has reportedly given the go-head to the government to sell additional bonds worth 500 trillion rials ($1.78b) by the time the current fiscal year is out in March 2022.
The CBI on its website said it will hold the next auction on Nov 23 and offer bonds worth 20.9 trillion rials ($74m).
Economists insist funding budget deficits via the bond market is a safer option than the government borrowing from the central bank, which runs the risk of expanding the monetary base and pushing up inflation.
As per CBI estimates, selling 400 trillion rials ($1.4 billion) in bonds reduces the inflation rate by 11 percentage points.
