The government’s bond offer was barely not welcomed this week by banks, credit institutions and institutional investors though underwriting financial institutions bought 20 trillion rials ($46 million).
Auctions are held by CBI on behalf of the Economy Ministry to raise funds for the government’s deficit spending. Buyers of debt normally are banks, credit institutions, investment funds and institutional investors.
As banks again stayed away, underwriters bought 20 trillion rials in debt during the 38th weekly auction, the Economy Ministry’s website reported. The shortest maturity date for the latest debt offer was May 2023 at 22.53%.
Banks mostly prefer short-term debt with lower yields while institutional investors are more inclined towards long-term debt with higher yields.
According to a CBI report banks purchased 3.8 trillion rials ($8.8 million) during the previous week. The last time government managed to sell bonds was four weeks ago when it was able to hardly generate 10.117 trillion rials ($24.9 million) from banks and credit institutions.
The Economy Ministry said it will hold the next auction on February 15 to offer 47.5 trillion rials ($110.4m) in new debt maturing in November.
Bond auctions started in May 2020 when banks and investment funds were instructed by the CBI to allocate a part of their resources to this end. Later, institutional investors and retail traders in the stock market joined.
According to ministry data, 694.66 trillion rials ($1.61 billion) bonds have been sold since last March. In addition to bonds, the government has sold treasury bills worth 350 trillion rials ($991.5m) during this period. Treasury bills are underwritten and given to contractors in lieu of unpaid bills.
As per the ministry data, banks and credit institutions account for 67% of the total sold bonds since the beginning of fiscal 2022-23 while the rest was taken by institutional investors in the bourse.
In the fiscal year that ended in March 2022 the CBI held 36 auctions generating 906 trillion rials ($3b) down 27% from the year before.
Debt is offered in line with provisions of the 2022-23 budget in which the government is allowed to offer 860 trillion rials ($2.8b) by March.
The ministry said recently that it paid the principal and interest on bonds worth 1,634 trillion rials ($3.8 billion) until February 8. More than 1,224 trillion rials ($2.84b) was the principal and 409 trillion rials ($951m) interest -- it being over and above government income from new debt offered during the period.
