According to recent changes in Iran’s debt market, the yield to maturity of treasury bills has been increased slowly because of offering new series of Islamic Treasury Bills on Fara Bourse. About 76,000 out of the new series with total value of 17 million ITBs that each priced at 865,000 Rials with the ticker of “TB191” were traded at IFB last week. The YTM of the offered ITBs was around 17.5% considering their price and maturity date in January 2019. The YTM of newly offered treasury bills shows more than 1 percent increase comparing to the previously offered treasury bills with the average of 16.2 percent yield to maturity base on their price and maturity date. This is while average YTM in debt market stayed below 15% in the last few weeks, which triggers speculation in gold coin market and foreign currencies market.
It seems the aforementioned increase in YTM of treasury bills will lead to increase in other bonds rates. In addition, according to increase in bond rates, it seems that in order to prevent market speculation, bank deposit rates are set to rebound in the upcoming weeks. Both market logic and historical trend in Iran’s money and debt markets indicate that risk free rate could be increased because high liquidity in short term will cause high inflation in near future.
The Central Bank of Iran announced in September 2017 that all banks and credit institutions have to set their one-year deposits and short-term interest rates at maximum of 15% and 10% respectively. According to the mentioned deposit interest rate cut, the liquidity growth behavior has changed. Based on last report of Central Bank of Iran, cash equivalents have lost its share in liquidity’s volume and the share of cash has increased compare to last year’s statistics. This important fact shows that there is a possibility for higher inflation which is against government’s macro economic policies. In addition, the speculation which caused recent gold and forex rallies leads to a bullish housing market too in the medium term. All in all, analysts believe that there is a possibility for rate hike in near future.
During past months Tehran Stock Exchange Index grew significantly from 77,000 in March 2017 to 99,000 in February 2018 and The Rial dropped to around 49,000 against the dollar in February 2018 which was around 37,700 in mid-2017. Increase in interest rate on deposits will have a great effect on capital market and could lead to drop in market index, also this occurrence could decrease speculation in foreign exchange currency market and gold market.