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EghtesadOnline: Bonds sold by the government jumped in the weekly auction on Tuesday to reach 48.1 trillion rials ($165 million), the highest in three weeks.

Unlike the last two rounds, the offers were greeted by both banks and credit institutions in the interbank market and retail and institutional investors with the latter group dominating trade in the primary debt market. 

In the interbank market bidders this time were four banks and credit institutions that put in bids worth 15.6 trillion rials and the Economy Ministry agreed to sell them 14.6 trillion rials ($50m), according to data published on the Central Bank of Iran website. 

The bigger contribution was by equity traders and financial institutions in the bourse led by fixed income funds, which have increased their bond holdings in the past few months. 

Retail and institutional investors bought debt worth 33.5 trillion rials ($115m) -- the highest in three months.

Bond sale is part of the government’s concerted effort to try and raise funds for its deficit spending worsened by the 2018 US economic blockade. 

The CBI on behalf of the government has held 26 bond auctions since May 2021 and generated 647 trillion rials ($2.2 billion).

The Economy Ministry Wednesday said that the bond income has been used in its entirety to repay the principal and interest of matured bonds sold in the past. 

In a press release posted on its news website, the ministry said that the government has paid 528.16 trillion rials ($1.8b) and 275.95 trillion rials ($950m) to settle the principal and interest of debts. That amount was 156.68 trillion rials ($540m) higher than the total bond proceeds in the present fiscal year that ends in March. 

Apart from bonds, the government has generated 810 trillion rials ($2.7b) from treasury bills in the present year. However, it has cut its income forecast from bonds in the 2022-23 fiscal budget. 

As per the provisions of the budget bill published by the Planning and Budget Organization, the government plans to sell 880 trillion rials ($3b) in debt next year. 

The figure is 445 trillion rials ($1.5b) or 33% lower than the 1,325 trillion rials ($4.5b) in projections from securities to finance budget spending in the present fiscal year, IRNA reported. 

Treasury bills account for 360 trillion rials ($1.2b) or 40% of the government’s income from selling debt.  Treasury bills are used as a debt instrument to reimburse the government’s debts to contractors.

Tapping into the bond market has gained traction in the past three years when the former government struggled to find new income to offset shrinking revenue due to the US unilateral economic sanctions.