Of the 51 trillion rials ($188 million) in bonds offered at the weekly auction in Tehran on Tuesday investors bought only 3.5 trillion rials ($13m) -- another sign of changing investor perceptions and attitudes in the unattractive debt market.
Struggling to buy bonds at higher rates, two banks and five investment funds put in bids worth 36 trillion rials but the Economy Ministry approved bids at 21% yield with three-year maturity and 20.4% for two-year maturity.
The auctions are held by the Central Bank of Iran to raise funds to help the government shore up its flagging finances. The CBI said it will hold the next auction on Nov.17 and offer the unsold bonds.
Saddled with deep budget deficits, the government is in dire need of new sources of funding, but its bond sales have failed to attract buyers in the past several weeks.
This was the seventh weekly government bond auction that failed to attract big investors. Despite success in the first few auctions, sales plunged sharply in the past seven weeks.
The government barely sold an average 4.2 trillion rials ($15m) in bonds in the past seven weeks. Prior to that, average weekly sale was 40 trillion rials ($148m).
Grappling with unprecedented budgetary challenges, the Rouhani administration had pinned high hopes on the debt market. Experts say the government needs a minimum 50 trillion rials a week to pay its bills.
So far the government has generated 730 trillion rials ($2.7b) in 24 weekly bond offers. Experts say it needs to sell at additional 520 trillion rials in the remaining 19 weeks before the fiscal year is out.
Low yield on bonds and high inflation expectations are seen as the main reasons behind the aversion to invest in fixed income assets.
