States' borrowing cost eases for third week in a row, dips to 7.52%

The weighted average cut-off of the 10-year state loans eased to 7.53 per cent on Tuesday from 7.61 per cent last week

rupee, economy, digital rupee
States' borrowing cost eases for third week in a row, dips to 7.52%. (Imaging: Ajay Mohanty)
Press Trust of India Mumbai
2 min read Last Updated : Sep 06 2022 | 10:59 PM IST

States breathed easy in the debt market as the average cut-off on their market borrowings dipped sharply to 7.52 per cent, down 15 basis points from last week to the lowest level since mid-May.

This is the third consecutive week of falling cut-off, as in the last two sessions the cost has come down by 10 basis points (bps). Last week the yield declined by 7 bps to 7.67 per cent.

At the weekly auction of State Development Loans (SDLs) on Tuesday, six states raised Rs 5,900 crore, which is nearly 54 per cent lower than indicated in their borrowing calendar for the week, Icra Ratings said in a note.

The weighted average cut-off eased sharply by 15 bps to 7.52 per cent at Tuesday's auctions. Similarly, there was also a decline in the weighted average tenor of the securities, the agency said.

It attributed the steep fall in yields to a fall in the weighted average tenor which declined to 13 years from 15 years as also a fall in cut-off across tenors.

The weighted average cut-off of the 10-year state loans eased to 7.53 per cent on Tuesday from 7.61 per cent last week.

However, the spread between the 10-year SDLs and new 10-year G-Sec (government securities) yields inched up to 39 bps from 38 bps last week, despite a 9 bps fall in the yields on new 10-year G-Secs yield to 7.14 per cent from 7.23 per cent last Monday, the agency added.

The six states that went to the market are Andhra, Assam, Bihar, Goa, Punjab, and Telangana, which collectively raised Rs 5,900 crore, while Gujarat, Jammu and Kashmir, Madhya Pradesh, Manipur, Rajasthan, Sikkim, and Tamil Nadu did not participate in the auction, even though they had indicated a combined borrowing of Rs 8,500 crore.

The auction was lower-than-indicated for the fourth consecutive week, since the release of the double tranche of tax devolution in early August.

Cumulatively 23 states raised Rs 2.3 lakh crore so far this fiscal, which is 15 per cent lower than the year-ago level when it was Rs 2.7 lakh crore and the actual issuance so far this fiscal is 34 per cent below the indicated level of Rs 3.5 lakh crore.

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

Subscribe to Business Standard digital and get complimentary access to The New York Times

Quarterly Starter

₹900

3 Months

₹300/Month

SAVE 25%

Smart Essential

₹2,700

1 Year

₹225/Month

Save 46%

Super Saver

₹3,900

2 Years

₹162/Month

Subscribe

Renews automatically, cancel anytime

Here’s what’s included in our digital subscription plans

Access to Exclusive Premium Stories Online

  • Over 30 behind the paywall stories daily, handpicked by our editors for subscribers

Complimentary Access to The New York Times

  • News, Games, Cooking, Audio, Wirecutter & The Athletic

Business Standard Epaper

  • Digital replica of our daily newspaper — with options to read, save, and share

Curated Newsletters

  • Insights on markets, finance, politics, tech, and more delivered to your inbox

Market Analysis & Investment Insights

  • In-depth market analysis & insights with access to The Smart Investor

Archives

  • Repository of articles and publications dating back to 1997

Ad-free Reading

  • Uninterrupted reading experience with no advertisements

Seamless Access Across All Devices

  • Access Business Standard across devices — mobile, tablet, or PC, via web or app

More From This Section

Topics :States budgetState borrowingeconomy

First Published: Sep 06 2022 | 6:34 PM IST

Next Story