borrowing costs: States’ borrowing costs see fourth consecutive weekly fall

States borrowing costs came down by 6 basis points to 7.46 per cent at the weekly auctions on Tuesday, data showed.

This is fourth consecutive weekly fall in borrowing costs.

At the latest auction, ten states raised Rs 10,500 crore of development loans. According to a PTI report, this figure is 1.5 per cent higher than indicated in the borrowing calendar — a first in a couple of years.

During the pandemic period, states were borrowing lower because of higher grants from the Centre.

Last week the Centre released Rs 58,300 crore as tax devolution for July, which was significantly higher than the Rs 47,600 crore each in the first quarter.

The Centre had also okayed Rs 31,500 crore of special assistance for capital expenditure to 10 states during the month under consideration.

During the week, the spread between 10-year state debt and the 10-year G-Secs (Government Securities) yield declined to 37 bps from 39 bps last week, according to an analysis by Icra Ratings.

Reflecting the declining trend, the 10-year G-secs yield declined to 7.08 per cent from 7.14 per cent last Tuesday.

Also, the weighted average cut-off of the 10-year state bonds eased to 7.45 per cent today from 7.53 per cent last week. Accordingly, the spread between the weighted average 10-year state debt and new 10-year G-Secs yield dipped to 37 bps from 39 bps.

Himachal Pradesh, Madhya Pradesh, Rajasthan and Sikkim, which had not indicated their participation in the auction, issued Rs 5,800 crore, while Goa borrowed Rs 800 crore more than indicated. In contrast, Haryana, Kerala, Meghalaya, Tamil Nadu, and Bengal did not participate in the auctions, even though they had indicated a combined borrowing of Rs 5,200 crore.

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