38309
1st Treasury Bills Redeemed
Economy, Business And Markets

1st Treasury Bills Redeemed

The government redeemed holders of its first batch of Islamic Treasury Bills this week, paying bond holders 5.58 trillion rials ($164 million at market exchange rate) in the process.
Iran's treasury sold its first batch of government bonds, called Islamic Treasury Bills, to domestic investors on Sept. 30. The new bonds were given as debt repayment to contractors who had the option to resell them in the Iran Fara Bourse over-the-counter market or wait and redeem them at maturity.
"Mutual funds and investment companies are the main customers of Islamic Treasury Bills," said Reza Gholamalipour, deputy head of IFB.
Similar to the US treasury bills that provide the backbone of fiscal spending in the world's largest economy, the Sharia-compliant bonds were sold at a discount to their face value in IFB.
According to Gholamalipour, bondholders earned a comfortable 11.4% return for the five months they held the bonds, bringing the real annual return on the treasury bills to 24.4%.
The effective interest rate on the bills has been higher than what banks offer on deposits. Capped by the Central Bank of Iran, banks currently offer interest rates of around 20% per year.

> Payment Issues

The government had to pay 5.75 trillion rials (about $169 million) to redeem all the bonds, but some bond holders did not submit their account information in time, leaving 170 billion rials ($4.9 million) of Islamic Treasury Bills unredeemed.
"State-owned lender Bank Melli will repay the remaining owners in the coming days," Gholamalipour said.
According to Mohammad Reza Mohseni, chief executive of the Central Depository of Iran which is in charge of clearing and settlement of securities, the dues were paid three days in advance of the bonds' maturity date on March 13.
The bonds were issued on Sept. 30, 2015.

> Borrowing to Cover Bills

The moderate government of President Hassan Rouhani is struggling with debts it inherited from its conservative predecessor, Mahmoud Ahmadinejad.
Tehran owes over 1 quadrillion rials ($29 billion) to the banking system plus an additional 550 trillion rials ($15 billion) to contractors. So the government is mobilizing all that it has at its disposal.
It is establishing a bond market and borrowing through it in various bond forms—from selling oil in advance to Islamic Treasury Bills.
Falling oil revenues—the government's main source of income, due to a drop in global crude prices from above $110 per barrel a year and a half ago to around $30—have sped up government's move towards better taxation and the introduction of debt financing, which have been a decade in the making.
Thus, bonds are making a comeback in Iran. After the 1979 Islamic Revolution, debt securities and even deposit accounts were considered usurious. So the existing corporate bond market was closed down and banking regulations were overhauled.
With the turnaround in policy during the last decade, private ownership and equity markets were given a place in the economy. After the Sharia compliance for debt securities was hashed out in the late 2000s, Iranian bonds started being traded on exchanges.
More bonds are to come next year. This year, the administration only issued 75% of the bonds it was legally allowed. The Ministry of Economy was unable to sort out enough assets to back the bonds. It is now surveying ministries for upcoming bond offerings.
"This year, we were unable to back enough sukuk due to the lack of a comprehensive database of government assets," said Economy Minister Ali Tayyebnia. "The first step is valuing our assets. The second one will be to manage them effectively."

Short URL : http://goo.gl/gMqqaT
  1. http://goo.gl/LhnJYL
  • http://goo.gl/mSHRGl
  • http://goo.gl/IYgyho
  • http://goo.gl/ct4Z0t
  • http://goo.gl/pzFMmX

You can also read ...

Pretoria Hosts South Africa-Iran Business Forum (Photo: AfricaNewsAgency)
The South Africa-Iran Business Forum was held in Pretoria,...
485,000 New Jobs Averaged Annually Since 2013
An average of 485,000 jobs were created every year during...
Furniture Exports on Decline
Iran exported about $6 million worth of furniture during the...
About 1,837 million shares valued at $86.508 million changed hands at TSE on Oct. 23.
Tehran Stock Exchange’s main index lost 134.00 points or 0.15...
The health deal was signed in Iran’s Embassy in London on Oct. 23.
Iran’s Ministry of Health signed an investment and cooperation...
Renault Launches Used-Car Sales Scheme in Iran
Negin Khodro, the local official importer of Renault cars, has...
The fiscal 2014-15 was the worst year for the construction sector in recent memory, with growth rate reaching its nadir at -17%.
The research arm of the Iranian Parliament has forecast a...
Over 14.88 billion shares valued at $1.11 billion were traded at TSE over the past month.
Tehran Stock Exchange’s main index TEDPIX gained 648 points or...

Trending

Googleplus