The bond market again signaled unease as investors remain unimpressed despite rising yields as seen over the past several months.
The government managed to sell some bonds in the last weekly auction on Wednesday. As per a report seen on the Economy Ministry news website, bonds barely worth 9.42 trillion rials ($19.6 million) were sold.
The auctions are held by central bank on behalf of the Economy Ministry to raise funds for the government’s deficit spending. Buyers normally are banks, credit institutions, investment funds and institutional investors.
Banks and credit institutions bought almost half the debt or 4.71 trillion rials ($9.8m) and institutional investors took 4.71 trillion rials ($9.8) in the 40th weekly auction. The shortest maturity date for the new debt was May 2023 at 25.5%.
Banks mostly prefer short-term debt with lower yields while institutional investors are more inclined towards long-term debt with higher yields. However, in the latest auction both banks and institutional investors preferred short-term bonds.
According to the CBI report, none of the banks nor institutional investors bought the debt in the previous auction. Underwriting financial institutions bought 20 trillion rials ($41.6m) and banks 3.8 trillion rials ($7.9m) during the 37th auction.
The Economy Ministry said it will hold the next auction on February 29 to offer 47.4 trillion rials ($98.7m) 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, 704.1 trillion rials ($1.46 billion) bonds have been sold since last March. In addition to bonds, the government has sold treasury bills worth 350 trillion rials ($729m) during this period. Treasury bills are underwritten and given to contractors in lieu of unpaid bills.
Per 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.
