State loan yields likely to rise further despite Centre's help

Even if the G-sec yields remain where they are, if the spreads have to normalise, the SDL cut-offs will need to rise, more so for weaker states

The Centre’s record high borrowing numbers in the Budget has resulted in states having to pay more for market loans, leading many to curtail their plans. However, costs may increase further in the next fiscal with the rise in yields on government securities, which act as the benchmark.

The cut-off yields for the 10-year state development loan (SDL), a term used for bonds issued by states, ranged from 7.24 per cent to 7.34 per cent, up about 13 basis points (bps) from the last week. The spreads, or the difference between G-sec yields and that of SDLs, now works out