The bond auction held weekly by the Central Bank of Iran again failed to attract big investors on Tuesday despite offers of higher yields.
The government put up 26.7 trillion rials ($90 million) bonds of which barely 2.8 trillion rials ($9.5m) were sold, according to data published on the CBI website.
One bank was the sole buyer and unlike previous rounds there was no contribution from stock market investors.
Bond sale is part of the government’s effort to raise funds for its growing budgetary needs as it struggles with bigger deficits due to the 2018 US economic sanctions that have battered oil exports.
In the previous auction last week, bond sale hit the highest in three months, when the government generated 71 trillion rials ($240 million).
Aversion to the bond offers comes despite the fact that the Economy Ministry raised the yield to 21.98%, the highest ever so far.
The CBI said that it will repeat the auction next week and offer 23.7 trillion rials ($81m) in new debt.
Earlier in the month, the Economy Ministry announced plans to issue 400 trillion rials ($1.3 billion) in the remaining weeks of the current fiscal year that ends next March.
It has predicted that 100 trillion rials ($333m) bonds would be bought every month.
Up until now, the government has generated 600 trillion rials ($2b) in almost nine months since the beginning of current fiscal year.
Apart from the bonds, the government has generated 810 trillion rials ($2.7b) from treasury bills in the present fiscal year.
Issuing bonds to cover budget deficits has been hailed by economists who argue that it helps in controlling inflation arising from the ballooning money supply and the gaping holes in the budget.
However, the recurring bond offers in recent months have turned out to be detrimental to the stock market because banks and investment funds are forced to sell their shares and inject the money into the debt market.
In the latest bid to support the battered stock market, the government approved a plan earlier in the week based on which selling bonds would be contingent on the amount of liquidity inflow into the stock market. In short, total bond sale each month should not be higher than 50% of the liquidity flowing into the stock market in the month.
