The cost of borrowing in the state market remains high. The average yield hit 7.83% in the auction held on Tuesday. This is just one point lower than the last state auction.
Seven states raised Rs 10,700 crore in a state government securities auction (SGS) on Tuesday. This is half of the Rs. 20,800 crore listed this week.
The weighted average cut-off fell to 7.83% from 7.84% last week. Although the weighted average age has increased from 13 to 15, Icra said in a note.
However, the yield on 10-year G-secs fell 4 basis points (bps) to 7.40 percent, while the weighted average cutoff for 10-year government bonds fell only 1 bps to 7.82 percent. The weighted average of 10-year government bonds and 10-year G-sec yields therefore rose to 42 bps from 39 bps.
The reason for the sharp drop in pulldowns was because major borrowers such as Haryana, Karnataka, Maharashtra, Tamil Nadu, Uttar Pradesh and Sikkim did not participate in the auction, although they indicated that they had taken the combined amount. Rs 10,200 crore for this week Also Andhra and Rajasthan borrowed Rs.1,100 crore less than stated.
In contrast, Madhya Pradesh raised 1000 crore more than stated and Punjab pulled Rs 200 crore more than stated in the quarterly auction calendar.
Kerala issued 23-year bonds at the cutoff level of 7.80%, lower than the cut-off of 7.82% on 10-year bonds from Assam and Rajasthan.
Overall, this fiscal cumulative drawdown so far is Rs.36 billion from 24 states, down 6% from the same period last year.
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