Borrowing rates

Average government borrowing rates rise sharply again

Mumbai: After falling last week, the cost of market funding for states continues to head north, with the latest auction seeing the average cut-off rate or yield jump 12 basis points to 7, 84%, but for the Center it remained flat.

After rising for four straight weeks, the average price states pay their debt investors fell 11 basis points to 7.72% at the Oct. 18 auction.

The weighted average threshold increased by 12 basis points to 7.84% from 7.72% at the last auction, with an increase in the weighted average duration to 13 years from 12 years, said Aditi Nayar, chief economist. from the rating agency Icra in a Note.

By contrast, the benchmark 10-year G-sec yield rose just 1 basis point to 7.44%, while the weighted average threshold of the 10-year government bond jumped 10. basis points at 7.83%. As a result, the spread between the weighted average 10-year government debt threshold and the 10-year G-sec yield fell from 30 basis points to 39 basis points.

Tuesday’s auction was the first so far this financial year in which states borrowed more than notified in the quarterly auction schedule as 14 states drew Rs 25,200 crore, or 3 % more than stated (Rs 24,500 crore) in the calendar auction. This auction was also the second largest of this fiscal year.

Haryana, Rajasthan, Uttar Pradesh and Bengal raised Rs 4,500 crore more than the amount they indicated in the Q3 auction schedule.

Additionally, Meghalaya borrowed Rs 300 crore, although it did not indicate its participation in the auction schedule for this week.

On the other hand, Karnataka, Punjab and Uttarakhand did not participate in the auction, even though they had indicated a combined loan of Rs 2,500 crore for this week, and Goa, Gujarat and Madhya Pradesh have borrowed Rs 1,600 crore less than stated.

Up to 52% or Rs 13,000 crore was in the longer tenors (means over 15 years), 27% or Rs 6,900 crore in the 10 year bracket and the remaining 21% in the shorter tenors.

But Kerala issued a 22-year bond at a 7.81% threshold and Tamil Nadu issued a 20-year bond at a 7.83% threshold. These thresholds are in line with or below the weighted average for 10-year papers, and more flexible than the threshold for 11-18-year securities raised by Madhya Pradesh, Rajasthan, Uttar Pradesh and Bengal when selling to auction.

Cumulatively, 24 states raised Rs 3.5 lakh crore, down 6% from the level a year ago.