Avg interest for states debt up 19 bps to 6.90%

Mumbai: The cost of borrowings for the states has seen a massive 19 bps spike to 6.90 per cent at the latest auctions on Tuesday because the average tenor of the debt has increased to 12 years.

While the weighted average yield of the 10-year state government loans auctioned on Tuesday when 12 states raised Rs 20,500 crore, was unchanged at 6.97 per cent from last week's auctions, the weighted average cut-off rose by 19 bps over the past week to 6.90 per cent at the latest auction, led by increase in tenor according to Care Ratings.

According to Icra Rating, the 10-year yield is ruling at the highest level since mid-August and have been tracing the rise in GSec yields since late September on concerns over rise in global energy prices and uptick in US treasury yields.

The spread between the 10-year state debt auctioned on Tuesday and the primary market yield of the 10-year GSecs too was unchanged at 64 bps, a Care report said.

As many as 12 states raised Rs 20,500 crore-- 19 per cent higher than indicated in the auction calendar--after drawing down more debt than the notified amount, even though Puducherry, which was scheduled to borrow Rs 125 crore, did not accept any amount at the auction.

Among the states that borrowed on Tuesday, four states (Andhra, Haryana, MP and Maharashtra) were not part of the indicative calendar while seven states did not participate in the auction even though they were listed.

Despite such high draw down, market borrowings of the states so far this fiscal is 13.9 per cent lower than in the same period last fiscal, as 27 states and two UTs have raised only Rs 3.68 lakh crore so far down from Rs 4.28 lakh crore by 28 states and 2 UTs, during the same period last year.

Similarly, the borrowings so far this year are 10 per cent lower than the indicative auction calendar.

Odisha has not availed of the market borrowing so far in FY22, while it had raised Rs 3,000 crore during the same period in FY21 and borrowing by Karnataka is 84 per cent lower than a year ago as both these states have seen a revenue surplus during the first five and six months of the FY22 respectively.