Yield on state government securities rises on record supply, shows data

The yield on state government securities rose as 17 states borrowed record Rs 50,206 crore at the weekly auction on Tuesday.  

The cut-off yield on 10-year papers was set in the range of 7.44 per cent to 7.7.50 per cent, against 7.36 per cent to 7.41 per cent at the previous auction.
 

It was 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.
 

“There was demand from investors as well as banks,” a dealer at a state-owned bank said. “The borrowing is expected to be even higher in the next auction,” he added.

Market participants believe that the supply at the last auction of the state government securities for the quarter might be higher than the current week, which might lead to further rise in yields on state government securities.
 

Next week, states will participate in the final auction for the current financial year and as per the indicative calendar, they are expected to raise Rs 29,399 crore from the market.
 

Meanwhile, the government bond yields remained relatively steady on Tuesday due to caution ahead of the US Federal Reserve meeting.