Bond sale by the government weakened again this week as the main buyers, namely banks and institutional investors in the stock market, opted out.
The government hardly made 100 billion rials ($304,800) in the 21st auction held by the Central Bank of Iran on Tuesday.
Auctions are held by CBI on behalf of the Economy Ministry to raise funds for the government’s budget deficits.
Buyers of government debt are banks, non-bank credit institutions, investment funds and institutional investors in the stock market.
In the absence of banks and credit institutions for the second week in a row, equity market investors bought 100 billion rials in debt last week.
The shortest maturity date was June 2024. The ministry set a maximum 22.29% for bonds maturing June 2025. The rate for shorter maturity was 21.8%.
Reports said 64.52 trillion rials ($196.4 million) in new debt were offered by the government in Tuesday's auction.
Data show that banks prefer debt with shorter maturity and lower yield, while institutional investors are more inclined towards bonds with higher yields.
The government generated 2,289 billion rials ($6.98m) in the 20th auction. The ministry said it will hold the next auction on Oct 18 and offer 64.6 trillion rials ($197m) in new debt.
Weekly bond auctions started in May 2020 when banks and investment funds were compelled to allocate a part of their resources to buy government bonds. Later, institutional investors and retail traders in the stock market participated.
According to ministry data, 505.4 trillion rials ($1.5b) bonds have been sold in 20 auctions since March.
In addition to bonds, the government sold treasury bills worth 350 trillion rials ($1.11b) so far this year. Treasury bills are underwritten and given to government contractors in lieu of unpaid bills.
In the last fiscal year, the government held 36 bond auctions and earned 906 trillion rials ($3b), down 27% from the year before that.
Debt is offered in line with the provisions of the 2022-23 budget in which the government is allowed to sell 860 trillion rials ($2.8b) bonds by next March.
The ministry recently said that it paid the principal and interest on bonds worth 931.4 trillion rials ($2.84 billion) up until Oct 4.
More than 700 trillion rials ($2.13 billion) was the principal and 231 trillion rials ($650 million) interest. The bond money was over and above government income from selling new debt in the present year.
