Cost of states borrowings up at 7.96 per cent

Reflecting the rising interest rate regime, states are paying higher for market borrowings with the weighted average cost for debt for the first time hitting 7.96 per cent, up 7 bps from last week.

Similarly, as much as 71 per cent of the debt issuances at the weekly auction on Tuesday was in longer tenors more than 10 years, thus increasing the weighted average tenor to 15 years, rating agency Icra said in a note.

Nine states raised Rs 12,800 crore from state development loan auctions, which is 17 per cent lower than the indicated amount, wherein the weighted average cut-off rose by 7 bps to 7.96 per cent, but the spread between the 10-year SDL and G-secs narrowed to 39 bps from 42 bps last week, as most of the auction was in longer tenors, the agency said.


Cumulatively, 21 states have raised Rs 1,44,600 crore so far this fiscal, which is nearly 23 per cent lower than the year-ago level when it was Rs 1,86,900 crore and 37 per cent lower than the indicated amount at Rs 2,29,100 crore.

Rajasthan raised a 20-year debt at a cut-off of 7.98 per cent, whereas its 16-year paper was at 8.10 per cent.

The benchmark 10-year G-sec yield rose to 7.43 per cent from 7.39 per cent last Tuesday, tracking the depreciation of the rupee against the US dollar and rising US treasury yields. The weighted average cut-off of the 10-year state debt increased mildly to 7.82 per cent from 7.81 per cent last week.

Accordingly, the spread between the weighted average 10-year SDL and 10-year G-sec yield declined to 39 bps from 42 bps.