State debt: the cost of State debt continues to fall; down 4 basis points to 7.67%

The cost of government borrowing fell for the second straight week on Monday, with the weighted average threshold lowering 4 basis points to 7.67%, from 7.71% at the last auction when it fell of 7 basis points. The yield on the benchmark 10-year G-secs also fell 4 basis points during the week to 7.23% from 7.27% last Tuesday, Ratings said on Monday.

The weighted average 10-year government debt threshold also fell to 7.61% in Monday’s auction, from 7.66% last week. As a result, the spread between the weighted average 10-year government debt and the new 10-year G-sec yield fell slightly to 38 basis points from 39 basis points, the agency said.

In Monday’s auction, six states (Andhra, Bihar, Haryana, Kerala, Punjab and Tamil Nadu) raised Rs 14,000 crore, 43% less than Rs 24,500 crore initially quoted for this week. It was the third consecutive week of lower-than-indicated issuance since the release of the double tranche of fiscal decentralization on August 10 (Rs 1.2 lakh crore) from the amount released in July 2022.

Gujarat, Maharashtra, Rajasthan, Telangana, Uttarakhand, Uttar Pradesh and Bengal did not participate in the auction even though they had indicated borrowing Rs 13,500 crore for this week.

In contrast, Kerala, Punjab and Tamil Nadu issued Rs 3,000 crore more than they reported.

Cumulative government debt issuance of Rs 2.2 lakh crore by 22 states so far is 12% lower than the previous year’s level, when it was Rs 2.5 lakh crore. Moreover, the actual issuance so far in FY23 is 33% lower than the stated level of Rs 3.3 lakh crore.

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