States borrowing cost rises 6 bps to 7.83 pc for the fourth week in a row

States continue to pay a higher cost for their dated securities for the fourth week in a row, with the latest auction of bonds offering an average yield of 7.83 per cent, up 6 bps from the last week. Eight states raised Rs 8,900 crore on Tuesday, which is nearly 29 per cent lower than Rs 12,400 crore indicated for this week in the auction calendar.

The weighted average cut-off of the state government securities increased by 6 bps to 7.83 per cent at today’s auction from 7.77 per cent in the last auction, despite a dip in weighted average tenor to 11 years from 13, Icra Ratings said in a note.

In contrast, the 10-year g-sec yield eased to 7.43 per cent today from 7.47 per cent last Tuesday whereas the weighted average cut-off of the 10-year state debt marginally rose to 7.83 per cent from 7.79 per cent.

Accordingly, the spread between the weighted average 10-year state bonds and g-sec yield increased to 41 bps from 32 bps, the agency said.

Karnataka, Madhya Pradesh, Maharashtra, Meghalaya, Puducherry, Tamil Nadu and Telangana did not participate in today’s auction, even though they had indicated a combined borrowing of Rs 7,800 crore.

In contrast, Andhra Pradesh, Haryana and Uttarakhand borrowed Rs 2,000 crore, despite not having indicated their participation in the auction calendar for this week. Additionally, Gujarat and Punjab raised Rs 2,000 crore and Rs 300 crore more, respectively, than what they had indicated in the auction calendar.

As many as 24 states cumulatively issued bonds worth Rs 3 lakh crore since April, which is 11 per cent lower than the year-ago level when they had raised Rs 3.4 lakh crore.

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