– In order to maintain the current calm situation of the FX market, a new wave of Islamic Treasury Bills with a nominal yield of 20.5% will be issued on Iran Fara Bourse from Saturday, Mar 10, 2018.” Said Nobakht the Spokesperson of the Government of Iran. President Rohani’s administration tried hard to leash USD/IRR before by introducing the CBI rescue package.
– On the 7th conference on Monetary Policies and Challenges Ahead Iran Banking Sector and Production held yesterday, the modernization and independence of the Iran Central Bank were deeply discussed. Resorting to examples like the operation of non-regulated financial institutions plus the divergence between the interest rate on banking deposits and the declining inflation rate to stress on the necessity of the CBI independence, lecturers raised the question whether the CBI had the required structure and authority to prevent such problems in the first place or not. The existing credit crunch also drove banks towards the CBI for help, which itself, limited the CBI maneuvering power in adopting the right monetary policies. Experts, then, referred to the measures affecting the forex market, which were never in complete control of the CBI, that limited this body’s options to curb inflationary expectations even more. Under such circumstances, it is obvious that lowering the interest rate on banking deposits will bring about forex market fluctuation risk, which might turn into a disaster with the slightest shocks in regards with foreign countries and seasonal events affecting supply/demand for foreign currency. Finally, the problems and challenges ahead were discussed from a legal point of view and the conference ended with proposals on the required changes to facilitate reforms providing grounds for implementation of such plans.
– Iran Central Bank managed to control the forex market fluctuations through offering its rescue package over the past week. While some economists believe that such a package will act as a proper tool to relax the current fluctuations and enable the policy maker to implement its reform plans free from irrational behaviors, there are some disagreeing with high interest rates, even for a temporary and short period of time. In other words, the first group believe that lowering such a rate by decree will not yield the proper result the policy maker is looking for while the other group say that the current CBI supervisory structure and not-respecting health indices by banks will push them towards old days, paving the way for un-regulated financial institutions re-gaining power in the market. However, what is common between those for and against the CBI directive lies within the temporary nature of this solution, which will only act as a painkiller and the need to address the structural reforms in monetary and financial areas ASAP.
– Securities and Exchange Organization of Iran granted its principal consent on issuance of IRR 1,050 bn worth of Sukuk Ijara (on Iran Capital Market) for Alborz Railways Equipment Co. in order to buy 15 locomotives. These securities will be offering on Iran Fara Bourse and have a maturity of 5 years with Ijara (Rent) rate of 15%. The guarantor for new corporate Sukuk is the Railways of Islamic Republic of Iran and Maskan Investment Bank will act as the market maker.
– Just the other day, Central Bank of Iran put a directive into effect allowing banks to issue 20% (Per annum) certificate of deposits which eventually affected Iran Debt Market. Aiming to stabilize the FX market, CBI directive caused a plunge in debt securities’, specifically Islamic Treasury Bills, prices, ended for almost all of the YTMs to hike over 20%. Analysts believed, considering the benefits of higher rates on Iran Debt Market contrary to banking sector, only by absorbing the free money streams by the capital market, rate jumps would have lesser inflation effect on the nation’s economy. Below table shows the latest status of Islamic Treasuries with highest yields as of Feb 17, 2018.
– In an attempt to put a cap on recent USD/IRR unrest, Central Bank of Iran offered an anti-fever package to contain the situation over the FX market. Offering 3 short term solutions, the package is to reduce the heat on the market and stabilize the fluctuations:
– In a new attempt to control day trading (speculating) on currency market, the Central Bank of Iran (CBI) submitted the details of major forex purchasers to the Tax Organization (over the period of March 21, 2017 to January 7, 2018) in order to put a cap on the recent growth in forex rates, make the market more transparent and become in control.
– The head of Iran Central Insurance, Naser Hemmati, announced that Iran Insurance sector companies have three (3) years to comply their financial statements in line with IFRS reporting standards. A work group comprising of experts from Securities and Exchange Organization (SEO), Central Insurance and Audit Organization are responsible to coordinate the GAAP analysis and make the bed for a smooth transition until 2021.
– Following the recent heated demand for foreign exchange in the market and IRR rally to 47,500 level against USD, which was also accompanied by officials warning about risks of speculations, the governor of the Central Bank of Iran announced the issuance of foreign currency bonds in the country within the next 2 weeks to provide those interested with safe options coupled with reasonable yields to dip their foot in the forex market. He, then, added that the National Iranian Oil Company await the reception of permits to issue such bonds as well.
– Continuing the stream of Iran’s government overdue liabilities settlement, today a new piece of Islamic Treasury Bills has been offered to public on Iran Fara Bourse. The issued securities worth IRR 17,000 bn (cUSD 373.62 mn) and will be matured in one year. “TB191” price at IRR 864,959 with a YTM and BEY of 17.46% (17.37% commission included) and 16.20% respectively. The below table shows the latest status of Iran’s Debt Market.