States' borrowing cost soars to 23-week high of 7.56%

States' borrowing cost jumped 10 basis points to 7.56 per cent at the first weekly debt auction of the third quarter on Tuesday and is the highest in the the past 23 weeks. Fourteen states raised Rs 22,500 crore through the issuance of state government securities in line with the indicated amount for this weekly auction for the third quarter calendar.

According to Aditi Nayar, the chief economist at Icra Ratings, the auctions saw a steep increase in the cut-offs across tenors leading to the weighted average cost jumping to a 23-week high of 7.56 per cent.

It stood at 7.46 percent last week.


The higher pricing of the borrowing is despite a steep decline in the weighted average tenor to 13 years from 17 years, Nayar said.

Moreover, she said the spread between the cut-off of 10-year state bonds and the new 10-year G-Secs (7.18 GS 2033) yield rose mildly to 33 bps from 32 bps last week.

On an annualised basis to the week, the states have drawn down 15.4 per cent more than what they had drawn in the same period last fiscal at Rs 19,500 crore.

With the latest auction, states have cumulatively raised Rs 3,80,500 crore from the debt market so far this fiscal, which is 28.6 per cent more than what they had raised in the same period last fiscal, as per Icra Ratings.