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EghtesadOnline: The government sold 30.4 trillion rials ($132 million) in Islamic bonds in the interbank and stock market during the weekly auction on Tuesday. As per an earlier announcement, it was to offer Murabeha bonds worth 50 trillion rials ($217m).

According to the central bank’s public relations office, bidders this time were six banks who put in bids worth 20 trillion rials ($87 million).  The Economy Ministry accepted bids worth 13.6 trillion rials ($60m). 

Retail and institutional investors in equity market bought the remaining 16.8 trillion rials ($73 million) outside of CBI auction. 

As per rules, banks and non-bank financial entities’ bids are processed by a brokerage affiliated to the CBI and sent to the Economy Ministry for approval.  

The Central Bank of Iran said it will hold the next auction on August 18 and offer bonds valued at 57.8 trillion rials ($251m).

The government so far has generated 530 trillion rials ($2.3 billion) from Islamic bonds in 11 weekly auctions held by the CBI every Tuesday since June.  

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

Economists say funding budget deficits via the bond market is a lesser evil than the government borrowing from the central bank. Over borrowing also means printing more money, running the risk of increasing the monetary base and galloping inflation. 

In a statement earlier in the week, the CBI hailed the auctions in funding budget deficits and preventing the government from over borrowing from the CBI. Pointing to bond revenue, the regulator said it “has gone a long way in avoiding [extra] money printing to finance the budget”.  

Buyers of government bonds are mainly banks, investment funds, insurance companies, government creditors and contractors of development projects. A portion of bonds are also sold to stock market investors.  

The CBI said banks were the main purchasers of the bonds and so far have bought more than 72.4% of the total. 

After banks, retail and institutional investors in the stock market were buyers of bonds followed by non-bank financial and investment companies. 


Bonds stock market government interbank Murabeha bonds