States bond prices down by 7 bps to 7.61% despite sharp spike in supply

Even though the states have borrowed heavily from the market — bond issuances at the weekly auction on Tuesday rose sharply by 42 per cent — the average prices came down by 7 bps to a three-week low of 7.61 per cent.

Twelve states have raised Rs 20,300 crore through state government securities on Tuesday, which is a sharp 42 per cent increase on-year, though the amount raised is 23 per cent lower than what was indicated for the week in the auction calendar.

Accordingly, the weighted average cut-off eased considerably by 7 bps to 7.61 per cent, which is a three-week low, despite the weighted average tenor remaining stable at 15 years, according to a note by Icra Ratings.

The spread between the 10-year state bonds and the new G-sec stood at 38 bps today, while same between the 10-year state bonds and old G-sec rose a notch to 34 bps from 33 bps last week. This had the yield curve remaining inverted at the longer end, the agency said.

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