The government generated 32 trillion rials ($106 million) in the first weekly bond auction in the present fiscal year that started in March.
Auctions are held by the Central Bank of Iran on behalf of Economy Ministry to raise funds for the government’s budget deficits.
Buyers of bonds usually are banks, non-bank credit institutions, investment funds and institutional investors in the share market.
According to data released on the CBI’s website, the role of capital market investors was crucial and the contribution of banks trivial in the first round of auctions held Tuesday.
Two banks put in bids worth 23.7 trillion rials but the Economy Ministry accepted bids worth 3 trillion rials. Retail and institutional traders purchased 29.7 trillion rials ($99 million).
The CBI had offered bonds worth 100 trillion rials ($333 million). It said it will hold an auction next Tuesday for the unsold bonds. The bonds are at 18% with one and two-year maturity dates.
As per the procedures, investors must put in bids for a minimum of 500,000 bonds each at par value of 1000 rials ($0.004) via the interbank auction platform managed by the CBI as well as the trade platform of the Tehran Securities Exchange Technology Management Company.
Weekly bond auctions started in May 2020 when banks and investment funds were compelled to allocate a significant portion of their resources to buying bonds. Later institutional investors and retail traders in the bourse joined.
In the last fiscal year the government held 36 bond auctions and earned 906 trillion rials ($3 billion), down 27% from the year before.
The new offers are in line with provisions of the fiscal budget law in which the government is allowed to sell 860 trillion rials ($2.8b) bonds by the time the current fiscal year is out in March 2023.
Bond auctions have helped governments plug the gaping holes in the fiscal budget by raising money from the interbank market without going to the CBI and run the risk of increasing money supply.
Last year the Money and Credit Council obliged banks to allocate a segment of their resources to bonds. Based on MCC rules, lenders must allocate at least 3% of their money to bonds.
