Aversion to Gov’t Bonds Persists

EghtesadOnline: Bond auctions held Tuesdays by the Central Bank of Iran concluded with none of the legal or individual investors showing interest in the government bonds.

News ID: ۷۵۱۲۲۴

10 October 2020

As per an earlier announcement, there were government bonds worth 67 trillion rials ($230 million) on offer on October 6 in the 19th auction of its kind.

The government has launched a series of bond auctions since May to sell Islamic bonds to banks and investment companies plus investors in the stock market.

“There was no bid by banks and other non-bank financial institutions either in interbank platform or trading platform at stock market,” the CBI said in a press release posted on its website.

Due to disruption in the trade platform of Iran Fara Bourse, the junior market for trading shares and securities, no trade was conducted at the stock market on Tuesday, the CBI said.

The CBI announced that it will repeat the auction on October 13 with 67 trillion rials in bonds.

A review of auction data indicates investors’ increasing aversion to the bonds in the past three weeks.

Bond sale declined sharply from an average 40 trillion rials to 7.1 trillion on Sept. 22 and 6.7 trillion rials in the previous auction on Sept. 29.

This is despite the obligation of lenders to buy bonds. The Money and Credit Council, the top monetary decision-making body, in August obliged banks to allocate at least 3% of their financial resources to buy bonds.

The auctions are intended to raise funds for government spending amid the steep decline in revenues and the perennial budget deficits.

The Economy Ministry says that government has so far sold 970.89 trillion rials ($3.3 billion) in bonds to shore up its finances in the March 2019-20 budget.

Accordingly, the budget is being funded with 260.7 trillion rials ($900 million) in treasury bills sold by the government. Bond sales via weekly bond auctions have contributed 710.19 trillion rials ($2.4 billion) to the budget deficit.