The last bond auction held by the Central Bank of Iran for the government on Tuesday generated 56 trillion rials ($215 million).
Investors had shunned debt market for several weeks. However, sales in the past two week have improved. A week before, 66.4 trillion rials ($255 million) bonds were sold, the highest in five months, according to data seen on the CBI website.
To sweeten the offers, the government has shortened the maturity date of bonds to less than two years. Most offers in previous rounds mature in at least three years.
This time buyers were mainly stock market investors while banks and credit institutions stayed away.
Observers ascribe bank absenteeism in the primary debt market to the lack of liquidity, despite the fact that they have been instructed to allocate a portion of their funds to buy the bonds.
Earlier the Money and Credit Council, the top monetary decision-making body, obliged banks to allocate at least 3% of their financial resources to bonds to involve them in the CBI’s open market operation plus control supply of money in interbank market.
Bond sale is part of the government’s policy to raise funds for deficit spending as it struggles with bigger deficits due to the 2018 US economic sanctions.
On behalf of the government the CBI has held 33 weekly bond auctions since May 2021 and generated 811 trillion rials ($3.1 billion).
Stock market investors bought 76% of the total bonds while banks and credit institutions took the rest, said the Economy Ministry website, Shada.ir.
The CBI will offer 100 trillion rials ($384m) in new debt on March 2. It acts as a broker in the debt market and is not allowed to buy bonds in the primary market.
The government says it prefers bonds instead of borrowing from the CBI, which is an ill-advised practice seen as one of the main drivers of exploding money supply and inflation in recent years.
The initiative to sell debt was launched in May 2020 when banks, investment funds and stock market investors were asked to take part.
