The government’s bond offer got another cold shoulder this week as the main buyers (banks and institutional investors in the stock market) stayed away.
Debt worth 7.83 trillion rials ($23.8 million) was sold in the 23rd 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 the debt normally include banks, non-bank credit institutions, investment funds and institutional investors.
In the absence of banks and credit institutions for the third week in a row, equity market investors bought 7.83 trillion rials ($23.8 million) bonds last week.
The shortest maturity date was June 2024. The ministry set a maximum 22.29% for bonds maturing June 2025. The rate for short-term debt was 21.2%.
Reports said 62.4 trillion rials ($190.1m) in new debt was offered on Tuesday.
Banks usually prefer short-term debt that have lower yields while institutional investors are more inclined towards long-term with higher yields.
Bond sale last week too was trivial. The ministry said it will hold the next auction on Nov. 1 and offer 54.13 trillion rials ($164.9m) in new debt.
Weekly bond auctions started in May 2020 when banks and investment funds were instructed to allocate a part of their resources to buy government debt. Later, institutional investors and retail traders in the stock market joined.
According to ministry data, 538.13 trillion rials ($1.63b) bonds have been sold in 23 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 contractors in lieu of unpaid bills.
In the last fiscal year the CBI held 36 auctions generating 906 trillion rials ($3b), down 27% from the year before.
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 said that it paid the principal and interest on bonds worth 1,020.2 trillion rials ($3.10 billion) up until Oct 26.
More than 780 trillion rials ($2.37 billion) was the principal and 239.9 trillion rials ($730.9 million) interest. The bond money was over and above government income from new debt offered this year.
