State debt costs up 12 basis point to 7.77 per cent

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State debt costs up 12 basis point to 7.77 per cent

The average cost of market borrowing for states increased by 12 basis point to 7.77 per cent on Monday, for the third consecutive week in a row. During the past three weeks, the cost of funds has gone up 31 basis points bps. At the latest auction of debt, 10 states raised $1,500 crore on Monday, which is less than the full amount indicated for this week. Aditi Nayar, chief economist at Icra Ratings, said in a note that the debt's weighted average tenor declined to 13 years from 15 years, the weighted average cut-off increased by 12 bps to 7.77 per cent from 7.65 per cent in the last auction. For four consecutive weeks the rates had fallen and had touched a low of 7.46 per cent before the yields began to climb three weeks ago. She attributed the spike in the cut-off to the rise in US treasury yields and the hike in the 50 bps repo rate by the RBI last Friday. The 10 year G-secs Government Securities yield went up to 7.47 per cent from 7.29 per cent last Tuesday, reflecting the hardening interest rate regime. The weighted average cut-off of the 10 year state bonds went to 13 bps to 7.79 per cent from 7.67 per cent last week. The spread between the weighted average 10 year state debt and G-secs yield decreased to 32 bps from 38 bps in the same period. At Monday's auctions, Rs 8,900 crore or 46 per cent of the total issuance was in longer tenors and Rs 6,600 crore or 34 per cent were in the 10 year bucket. The balance of Rs 4,000 crore or 21 per cent was raised by Maharashtra as an eight-year debt. Punjab borrowed Rs 400 crore in 20 year tenor at 7.7 per cent, while Kerala raised Rs 400 crore in 25 year tenor at 7.7 per cent, which was lower than the weighted average cut-off of 7.79 per cent of the 10 year tenor.