Six states to borrow nearly Rs 13,000 crore through bonds on Tuesday

Six states plan to borrow Rs 13,000 crore at the weekly state bond auction on Tuesday, 66.3 per cent lower than the calendar amount of Rs 38,600 crore.

 

Market participants said the yield spread on the 10-year state bond and the benchmark government bond is expected to tighten by 1–2 basis points on the back of reduced supply. The yield spread stood at 92 basis points on January 13.

 

“On a standalone basis, 1–2 basis points compression in spreads between G-sec and SDL is expected, but flattening of the yield curve is the trend and it would continue,” said a dealer with a primary dealership.

 

States and Union Territories plan to borrow up to Rs 4.99 trillion through state government securities in the fourth quarter of the current financial year. The borrowing amount was on the higher end of expectations.

 

States had borrowed Rs 5 trillion through state bonds in the first half of FY26, with Q2 issuances marginally exceeding the indicative borrowing calendar, the first such instance in seven quarters.

 

The weighted average maturity of SDLs has been rising over the past few years and has extended further in FY26. From around 11 years during FY18 to FY20, the average maturity increased to 13.3 years during FY21 to FY25. In the first half of FY26, it rose further to 16.6 years, up from 14.3 years in FY25.