States borrow a record Rs 32,800 crore, cost jumps by 7 bps to 7.68 pc

Despite near 60 per cent more supplies, the states continued to pay more for their market borrowing with the average bond pricing rising by 7 basis points to a multi-week high of 7.68 per cent at the weekly auction on Tuesday. For the past many weeks, the yields were more or less stagnant and so was the debt-raising.

Fourteen states raised a record-high Rs 32,800 crore from the market by issuing state government securities (SGS), which is a sharp 59 per cent higher than the year-ago level, even though the amount is 8 per cent lower than indicated in the auction calendar, Aditi Nayar, the chief economist & head of research at Icra Ratings said in a review note.

She said the 7 bps rise in the weighted average cut-off to 7.68 per cent is due to the concerns related to monetary tightening as latest inflation numbers surprised on the downside.

However, despite the all-time high borrowing and a mild increase in the weighted average tenor to 16 years from 15 years, the spread between the 10-year SGS and yield came down to 29 bps from 31 bps last week, she said.