The government's weekly bond sale was held on Tuesday as banks and credit institutions again stayed away.
Debt worth 10.623 trillion rials ($29.1 million) was sold in the 26th auction held by the Central Bank of Iran. Auctions are held by CBI on behalf of the Economy Ministry to raise funds for the government’s fiscal holes.
Buyers of the debt normally are banks, credit institutions, investment funds and institutional investors. In the absence of banks and credit institutions, equity market investors bought 9.59 trillion rials ($26.2 million) worth of short-term bonds and 1.028 trillion rials ($2.8 million) bonds with longer maturity.
The shortest maturity date was May 2023 with the ministry setting 22.53% for bonds maturing in June 2024. The rate for short-term debt was 22.32%.
Banks usually prefer short-term debt that have lower yields while institutional investors are more inclined towards long-term with higher yields.
Debt worth 15.75 trillion rials ($43.17 million) was sold in the previous auction with banks taking part after almost two months. Their contribution, however, was insignificant – hardly 480 billion rials ($1.3 million).
The ministry said it will hold the next auction on Nov. 22 to offer 66.77 trillion rials ($182.9m) in new debt for which the shortest maturity date will be May 2023 apparently to induce buyers.
Weekly 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, 617.362 trillion rials ($1.69 billion) bonds have been sold in 26 auctions since March.
In addition to bonds, the government sold treasury bills worth 350 trillion rials ($958.9m) so far this year. Treasury bills are underwritten and given to contractors in lieu of unpaid bills.
In the last fiscal year 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 sell 860 trillion rials ($2.8b) bonds by next March.
The ministry says it paid the principal and interest on bonds worth 1,178.41 trillion rials ($3.22 billion) up until Nov 8.
More than 921.57 trillion rials ($2.52 billion) was the principal and 256.8 trillion rials ($703.5 million) interest. The bond money was over and above government income from new debt offered this year.
