The weekly government bond auction held by the Central Bank of Iran barely generated 32.24 trillion rials ($83.7 million) as major buyers stayed away for the fifth week in a row.
Auctions are held on behalf of the Economy Ministry to raise funds for the government’s deficit spending. Buyers of the debt normally are banks, credit institutions, investment funds and institutional investors.
In the extended absence of equity market investors, banks were the main buyers of debt this week. Retail and institutional investors in the capital market bought only 15 million rials in long-term bonds. Banks took 18.28 trillion rials in long-term debt and 13.959 trillion rials in short-term bonds.
The shortest maturity date was May 2023 with 23.95% for bonds maturing in June 2024 while the rate for short-term debt at 22.50%.
Banks by and large prefer short-term debt that have lower yields while institutional investors are inclined towards long-term debt with higher profit.
Previous auctions failed to attract the big players. Debt worth 5.55 trillion rials ($15.3 million), was sold in the 29th auction.
The ministry said it will hold the next auction on January 1 to offer 68.27 trillion rials ($177.7m) in new debt with November 2023 as maturity date.
Bond 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, 622.911 trillion rials ($1.76 billion) bonds have been sold since March.
In addition to bonds, the government has sold treasury bills worth 350 trillion rials ($991.5m) this year. Treasury bills are underwritten and given to contractors in lieu of unpaid bills.
In the last fiscal year ending March 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 recently that it paid the principal and interest on bonds worth 1,337 trillion rials ($3.47 billion) up until Dec 21.
More than 997.171 trillion rials ($2.82b) was the principal and 340.802 trillion rials ($806.6m) interest it being over and above government income from new debt offered this year.
