States sell record amount of debt at near-record high price on final auction day

The states have been forced to pay a near record high of 7.81 per cent for their market borrowings on the final auction of the outgoing fiscal on Tuesday, despite record supplies.Fifteen states have raised a record Rs 41,200 crore from the market, which is a record supply in recent years.

The states have been forced to pay a near record high of 7.81 per cent for their market borrowings on the final auction of the outgoing fiscal on Tuesday, despite record supplies.

Fifteen states have raised a record Rs 41,200 crore from the market, which is a record supply in recent years. This supply is a sharp 67 per cent more than the indicated amount in the auction calendar and a full 34 per cent higher than the year-ago level. Despite this record supply, the weighted average cut-off rose by 7 bps to 7.81 per cent, Aditi Nayar, the chief economist at Icra Ratings said in a note.

The price went up sharply in spite of the large auction and a rise in the weighted average tenor to 16 from 14 years, she said, adding the spread between the 10-year state bonds and the yield on the 10-year Gilt rose to 47 bps from 43 bps last week.