The weekly government bond offer held by the Central Bank of Iran got a cold shoulder 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 are banks, credit institutions, investment funds and institutional investors. In the absence of equity market investors, this week hardly one bank put a bid for 1.9 trillion rials ($5.4 million) worth of short-term bonds, however but the offer was not approved by the Ministry of Economy.
The shortest maturity date was May 2023 with a maximum 22.53% for bonds maturing June 2024. The rate for short-term debt was 22.32%.
Banks mostly prefer short-term debt that have lower yields while institutional investors are more inclined towards long-term debt with higher yields.
Debt worth 10.623 trillion rials ($29.1 million) was sold in the previous 26th auction. Equity market investors bought 9.59 trillion rials ($26.2m) worth of short-term bonds and 1.028 trillion rials ($2.8m) in longer maturity last week.
The ministry said it will hold the next auction on Nov. 29 to offer 66.8 trillion rials ($182.9m). The shortest maturity date for the next auction will be May 2023 apparently to induce buyers.
Weekly auctions started in May 2020 when banks and investment funds were instructed by the CBI 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, 617.362 trillion rials ($1.691 billion) bonds have been sold since March.
In addition to bonds, the government has sold treasury bills worth 350 trillion rials ($958.9m) 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 offer 860 trillion rials ($2.8b) by next March.
The ministry said that it paid the principal and interest on bonds worth 1,178.41 trillion rials ($3.22 billion) up until Nov 8.
More than 921.57 trillion rials ($2.52b) was the principal and 256.8 trillion rials ($703.5m) interest. The bond money was over and above government income from new debt offered this year.
