Bond auction: 9 states borrow Rs 16,200 crore, Tamil Nadu tops list

Nine states on Tuesday raised Rs. 16,200 crore, through the first auction of the second quarter of the current fiscal year, for state government securities. This is against Rs. 22,450 crore raised by 12 states last week.

State governments and Union Territories (UTs) plan to raise Rs. 2.37 trillion through state development loans (SDLs) during July-September, the second quarter (Q2 of FY24).

States and UTs tapered their borrowings in the first quarter.

They borrowed only 84 per cent of the notified amount of Rs. 1.9 trillion.

According to Reserve Bank of India (RBI) data, Tamil Nadu raised the highest amount — Rs. 4,000 crore through two bonds in the current auction.

Of this, Rs. 2,000 crore was through a 20-year paper with a cut-off yield of 7.45 per cent. And, Rs. 2,000 crore was through a 10-year paper with a cut-off yield of 7.44 per cent.

Meanwhile, the yield spread between the 10-year SDLs and the benchmark 10-year government bond is currently 32 basis points. Long-term investors are opting for state bonds rather than government bonds due to higher returns, dealers said.

“Most of the papers were longer tenures. So, we had only a few options like Tamil Nadu, and Andhra Pradesh with 10-year, and 11-year tenure,” a dealer at a state-owned bank said.

He added, “It was longer tenures only, so insurers were there.” Typically, banks stock up on bonds maturing up to 10-12 years, dealers said.