Maharashtra rejects bond bids again as seven states raise ₹11,600 crore

Maharashtra declined all bids for its long-term bond re-issues even as seven states raised Rs 11,600 crore, below the notified Rs 13,600 crore, at the weekly auction on Tuesday

Seven states raised ₹11,600 crore at the weekly bond auction on Tuesday, lower than the notified amount of ₹13,600 crore. Maharashtra rejected all bids for the re-issue of its 2050 and 2055 bonds, each worth ₹1,000 crore.

 

The amount borrowed was also well below the ₹19,450 crore indicated in the borrowing calendar.

 

“The cut-offs were along the expected lines. For Maharashtra, the bidding was also good, but they decided not to accept any bid,” said a dealer at a state-owned bank. 

 

Maharashtra had rejected bids on August 26 this year. According to experts, Maharashtra's fiscal position is better than some other states as a result they are not willing to borrow at any cost. 

The cut-off yield on 10-year state bonds was set at 7.14 per cent, against 7.23 per cent in the previous week.

 

“Maharashtra’s decision likely reflects its treasury management, as borrowing costs are much higher now. For instance, Andhra Pradesh’s 10-year state development loan (SDL) traded about 60 basis points (bps) above the G-Sec, with the spread widening from 30-40 to around 60 bps. The state may either have sufficient revenue and doesn’t need funds immediately, or is unwilling to borrow at such elevated rates, preferring to wait for yields to ease,” said Madan Sabnavis, chief economist, Bank of Baroda.

 

Borrowing by states has fallen in the current quarter due to the release of two tranches of tax devolution in October, which may have eased the funding requirements of some states.

 

In Q2FY26, states had indicated borrowing ₹2.87 trillion but borrowed ₹3 trillion instead.

 

States and Union Territories plan to raise up to ₹2.81 trillion through state government securities in the third quarter of the current financial year.

 

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

 

Anticipating the fiscal impact of GST rate rationalisation beginning in Q3, the central government front-loaded ₹1 trillion of tax devolution to states on October 1, in addition to the regular monthly transfer.

 

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-FY20, the average maturity increased to 13.3 years during FY21-FY25. In the first half of FY26, it rose further to 16.6 years, up from 14.3 years in FY25.