States raise record Rs 35,800 crore through securities auction

In the largest-ever state government securities auction so far this fiscal, 12 states on Tuesday raised Rs 35,800 crore at an average annualised price of 7.74 per cent. The current drawdown is 15 per cent higher than the amount indicated for the week in the auction calendar and 66 per cent higher than the year-ago period. This is the penultimate week in the borrowing calendar for the states this fiscal.

Despite increased supply, the states were forced to offer better yields to investors as the weighted average cut-off rose by 7 bps to 7.74 per cent over the past week’s auction, according to an analysis by ratings agency Icra.

The agency also noted that the weighted average cut-off rose by 7 bps in spite of the weighted average tenor declining mildly to 14 years from 15 years.

This also had the spread between the 10-year state bonds and the yield on the 10-year gilt widening to 43 bps today from 34 bps last week.