States' debt cost continues to rise, nears 7.5%

States continue to pay higher interest rates to investors for their debt, with the latest weighted average cost rising to 7.46 per cent at Tuesday's auctions wherein nine states raised Rs 16,200 crore.

The weighted average cut-off/yield on state government securities (SGS) rose by 5 bps to 7.46 per cent in the auction held on Tuesday, from 7.41 per cent in the last weekly auction, despite a stable weighted average tenor of 16 years and the money raised was in line with the amount indicated for this week in the auction calendar, according to a note by Aditi Nayar, the chief economist at Icra Ratings.

Accordingly, the spread between the 10-year SGS and 10-year government of India security yield eased mildly to 32 bps from 34 bps last week.