Bond Market Hit, Again

EghtesadOnline: Banks, credit institutions and equity market investors again stayed away from the weekly bond auction held by the government.

News ID: ۷۸۷۵۴۵

01 January 2022

Bonds sold this week was hardly 99.9 billion rials ($341,000) -- almost nothing given the 23.7 trillion rials ($81 million) on offer, according to the Central Bank of Iran data.

On behalf of the Economy Ministry, the CBI is in charge of selling bonds to banks and credit institutions via the  interbank market and to retail and institutional buyers in the equity exchange market.

This is the second consecutive week that investors shunned the bond market. A week before 2.8 trillion rials ($9.5m) bonds were sold.

Bond sale is part of the government’s policy to raise funds for its ballooning budget deficits due largely to the  US economic blockade that, among other things, has hurt the oil export industry – the lifeline of the economy.

The bond setback is despite the fact that the Economy Ministry raised the yield to 21.98% -- the highest ever.

Earlier in the month, the ministry announced plans to issue 400 trillion rials ($1.3 billion) in new debt in the remaining weeks of the current fiscal year that ends next March.

It has forecast that the government will sell 100 trillion rials ($333m) on a monthly basis.

The government has generated 600 trillion rials ($2b) in the nine months since the beginning of current fiscal year.

For the next auction scheduled on Jan.4, the CBI said 123 trillion ($420m) in bonds will be offered.

Bond sale has reportedly helped cover the budget deficit to a considerable degree and helped avoid borrowing from the CBI that in the past fueled hyperinflation by increasing the money supply.