Borrowing cost for States at record 7.69%
In spite of a sharp 40 per cent decline in bond issuances, States have been forced to pay more for their market borrowings as the weighted average interest rate touched a record 7.69 per cent at the latest auctions of state government securities.
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Mumbai: In spite of a sharp 40 per cent decline in bond issuances, States have been forced to pay more for their market borrowings as the weighted average interest rate touched a record 7.69 per cent at the latest auctions of state government securities.
So far this fiscal, the issuance of State Development Loan (SDL) as State debt is known, has declined 40 per cent as 10 States did not participate in the auctions conducted so far. However, at the auctions held on Tuesday, the issuances were 7 per cent higher-than-indicated. After four consecutive weeks of trailing the indicative level, it is the largest weekly auction so far in FY23, according to a note from Icra Ratings.
As per the note, at the auctions held on Tuesday, the weighted average cut-off hardened by a whopping 34 basis points (bps) to 7.69 per cent from last week, with rising cut-offs across tenors leaving the spread between the 10-year SDL and G-Sec at 46 bps.
