Central Bank of Iran Assigns Sukuk Trading to Capital Market

Financial Tribune – The Central Bank of Iran has finally stepped in and put a stop to the trading of the so-called Sakhab bonds by banks and delegated them to the Securities and Exchange Organization.

Sakhab is one of the many types of debt securities issued by the government meant to clear its debts to contractors. It matures in a year and is priced at 1 million rials ($26.1) per bond. It could only be traded in certain branches of Bank Melli Iran.

Things seem to have come full circle, considering that the SEO had previously refused to accept more Islamic treasury bills in the capital market in March and the government decided to sell them through banks. Consequently, the only result so far has been to antagonize investors and playing into the hands of middlemen who benefit from lack of transparency in an unregulated market.

In a letter publicized on Tuesday, CBI’s head of Credit Department, Ali Asghar Mirmohammad-Sadeqi, announced that “banks and credit institutions are no longer allowed to participate in the secondary trading of sukuk”.

The new Minister of Economic Affairs and Finance Masoud Karbasian also echoed similar remarks during his inauguration ceremony on Wednesday, vowing to stand against the issuance of any bond issued by the government outside the capital market.

The government started issuing bonds for its debts to contractors in 2015 and they were exclusively traded on the over-the-counter market Iran Fara Bourse. But that was only until this year’s March when the bonds’ high rates and low risk made them rival equities and the government was pressured to refrain from issuing more.

According to a report published by the Ministry of Economic Affairs and Finance, the return on one-year bonds stand at about 27-29%,  while the rate is down to 20-23% for bonds maturing on more than a year.