State governments’ borrowing costs thawed at Tuesday’s auction of securities, tracking softening in the yield of Government Securities.

At the last weekly auction of April 2023, the weighted average cut-off of the State government securities (SGS) declined by 16 basis points (bps) to 7.42 per cent from 7.58 per cent in the last auction, with a drop in the weighted average tenor to 9 years from 17 years during the same period, according to an analysis by ICRA.

Four states — Andhra Pradesh (₹3,000 crore), Gujarat, Haryana and Telangana (₹1,000 crore each) — raised ₹6,000 crore through SGS, only a third of the amount indicated in the Q1 FY24 auction calendar for this week, the credit rating agency said.

The agency noted that the spread between the 10-year SGS and (7.26 GS 2033) yield eased to 30 bps on Monday from 36 bps last week.

Bond yields

Yield of the widely traded 7.26 per cent 2032 Government Security (G-Sec) had declined to a seven month low on Monday to close at 7.1396 per cent (previous close: 7.1856), with its price rising by 31 paise to close at ₹100.795 (₹100.485), in the wake of strong demand for G-Secs at the weekly auction on Friday.

However, on Tuesday, yield of the aforementioned G-Sec nudged up 2 bps to close at 7.1596 per cent, with its price declining about 14 paise to close at ₹100.66.

Bond yields and prices are inversely co-related and move in opposite directions.

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