Monetary transmission of a different kind: Road map for borrowing success

Despite a 1 percentage point rate cut, bond yields have been rising, and the spread between government securities and SDL as well as corporate papers is widening

On August 26, at an auction of state government securities, called state development loans (SDLs), Maharashtra did not accept a single bid. Like many other states, it was in the market to raise Rs 4,000 crore through bonds maturing in four, eight, nine and 10 years. There were plenty of bids worth at least Rs 15,000 crore for its SDL, but the state didn’t want to pay the bidders’ asking rate.

 

This doesn’t happen often. The last time a state didn’t accept any bids at an SDL auction was on April 25, 2018. The state, again, was Maharashtra, and it