Higher Yields Fail to Entice Bond Buyers

EghtesadOnline: The government bond sale stumbled again on Tuesday as banks refused to partake and purchase of stock market investors was insignificant.

News ID: ۷۸۷۴۰۶

11 December 2021

Total bonds sold by the Central Bank of Iran was barely six trillion rials ($20 million) from the 58 trillion rials ($195m) on offer.

Buyers were retail and institutional investors in the bourse while banks preferred to stay away for the second week in a row.

Yield on longer maturity periods was 0.1 percentage point shy of 22% -- the highest the Economy Ministry has offered so far.

Bonds maturing in Oct. 2022 and Oct.2023 bear 21.5% and 21.7%, respectively, according to the CBI website.

The CBI said 102 trillion rials ($340m) in new debt will be offered next week on Dec 18.  The bank acts as broker in the debt market and is not allowed to purchase bonds in the primary market.

On behalf of the government, the CBI is in charge of selling bonds to banks and credit institutions via the interbank market and to equity exchange market investors.

Bond sale is part of the government’s policy to raise funds for budgetary needs as it struggles with unprecedented deficits due to the US sanctions on the oil industry – the lifeline of the economy.

Last week, the Economy Ministry announced plans to offer  400 trillion rials ($1.3 billion) in debt in the remaining weeks of current fiscal year that ends in March.

It said the government intends to sell100 trillion rials ($333m) bonds every month – a tall order say observers.

The government has generated 525 trillion rials ($1.7b) in eight months since the beginning of current fiscal year.

The CBI supports bond sale for deficit spending, saying that it is a safer venue than the government borrowing from the central bank that over the years has given rise to chronic inflation and the ballooning money supply unseen in recent memory.