'States borrow only 38 pc of notified amount as yields still rule high'

With the average bond yields still ruling firm at 6.98 per cent, which is marginally higher than the previous week, states borrowed only 38 per cent of the previously notified amount at Rs 7,000 crore, at the auctions held on Tuesday, according to rating agencies.

Only three states -- Tamil Nadu (Rs 2,000 crore offering 6.97 per cent for 10-year-debt); Uttar Pradesh (Rs 2,500 crore at 6.99 per cent for 10-year debt); and West Bengal (accepting bids for Rs 2,500 crore offering an yield of 6.99 per cent for nine-year money) -- participated in the auctions on Tuesday, which is 62 per cent lower than the previously notified amount, according to rating agency Icra.

The lower drawdown could be attributed to the higher yields at 6.98 per cent, up one bps from last week, and also to the liquidity that states have after the Centre released over Rs 75,000 crore to them towards GST payouts last week, another agency Care Ratings said in a note.

While for the current week, the issuance plunged 62 per cent for the year-to-date; it declined 9.8 per cent and 9 per cent for the month, according to Icra.

In another significant development, the share of 10-year loans has increased to 58 per cent in July, from 24-45 per cent in the previous three months, indicating that longer tenure bonds have no takers.

The weighted average cut-off rose to 6.98 per cent from 6.97 per cent last week across the states and maturities, while the spread between the 10-year bonds and new G-sec narrowed to 80 bps on July 27 from 87 bps last week.

Tamil Nadu, Bengal and UP raised the entire notified amount totalling Rs 7,000 crore. With this, the market borrowings by the states in the first five months of FY22 stood at 14 per cent less than on-year amount, with 23 states and Delhi raising Rs 1,93,850 crore so far as against Rs 2,24,876 crore a year ago.

According to the tentative borrowing calendar, 26 states and Delhi were to raise Rs 2,25,050 crore by now but the actual drawdown is only 86 per cent of this amount.

While some states have borrowed more than the indicated amount, the others have either raised lower quantum or have not tapped the market at all so far this year.

Himachal Pradesh, Jharkhand, Odisha and Tripura are yet to tap the market for funds though they were supposed to raise Rs 5,600 crore by now.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)