States plan to raise record Rs 50,206 crore next week through bonds

Seventeen states and Union Territories plan to borrow Rs 50,206 crore next week through the auction of state government securities, marking the highest amount borrowed through state bonds in a single auction.

It will be the second last auction of state government securities for the quarter.

The notified amount was significantly higher than the calendar amount of Rs 27, 810 crore.

The previous highest borrowing by states in a single auction was on March 24, 2023, when they borrowed Rs 35,821 crore.

Market participants said the yield on the state bonds might harden by 1-3 basis points given the higher supply.

“The borrowing amount is the record high, but it will impact the yield by only 1-3 basis points because of the year end,” said a dealer at a state-owned bank.

At the previous state loan auction, the cut-off yield on the 10-year state government securities was set in a range of 7.36-7.41 per cent.

Fourteen states and Union Territories had raised Rs 35,544 crore at the weekly state bond auction, higher than the calendar amount of Rs 32, 532 crore.

Market participants said insurers and pension funds were expected to be the major bidders at the auction.

“The auction should sail through given that there is no central government securities supply,” said a dealer at another state-owned bank.

States’ indicative borrowing for the fourth quarter of the current financial year was higher than expectations. States have a plan to borrow up to Rs 4.1 trillion in the last quarter as compared to Rs 2.37 trillion in October-December period of FY24.