Key Highlights
- Revised Auction Size
- The Reserve Bank of India revised the scheduled state bond auction amount for to ₹52,120 crore, up from the previously planned ₹40,120 crore.
- Previous Auction Recap
- In the previous auction, 20 states raised a total of ₹49,522 crore through debt sales.
- Top Borrowing State
- Out of the 13 states participating in the current auction, Karnataka plans to borrow the highest amount of ₹7,000 crore.
- Bond Yield Trends
- In the last auction, the cutoff yield on 10-year state bonds was in the range of 7.18% to 7.27%.
- The rise in yields was attributed to heavy supply and a lack of demand from long-term investors.
- Banks refrained from aggressive purchases, primarily due to ongoing liquidity constraints.
The pressure on yields due to oversupply and weak demand signals challenges for state governments, especially with banks facing liquidity issues. Market participants will be closely watching future auctions and investor appetite for state debt amid tightening financial conditions.
Source: BS
