Mumbai: In the second largest auction so far in FY23, 14 state governments raised ₹25,200 crore through state government securities (SGS) on Tuesday, 3% higher than the ₹24,500 crore indicated for the week in the Q3 FY23 auction calendar, rating agency Icra said.
The weighted average cut-off of the SGS rose by 12 basis points (bps) to 7.84% on Tuesday from 7.72% in the last auction, with a rise in weighted average tenor to 13 years from 12 years.
The 10-year G-sec yield increased mildly to 7.44% on Tuesday, from 7.43% last Tuesday. The weighted average cut-off of the 10-year SGS jumped to 7.83% from 7.73% in the same period. Accordingly, the spread between the weighted average cut-off of 10-year SGS and the 10-year G-sec yield increased to 39 bps from 30 bps in the same period.
Haryana, Rajasthan, Uttar Pradesh and West Bengal raised ₹4,500 crore more than the amount that they had indicated in the Q3 FY23 auction calendar. Additionally, Meghalaya borrowed ₹300 crore on Tuesday, despite not having indicated its participation in the auction calendar for this week.
In contrast, Karnataka, Punjab and Uttarakhand did not participate in the auction, even though they had indicated a combined borrowing of ₹2,500 crore for this week, and Goa, Gujarat and Madhya Pradesh borrowed ₹1,600 crore less than indicated.
According to Icra, in the auction, ₹13,000 crore (or 52% of the total) was in the longer tenors, ₹6,900 crore (27%) in the 10-year bucket and the balance (21%) was in the shorter tenors.
“Notably, Kerala issued a 22-year SGS at a cut-off of 7.81% and Tamil Nadu issued a 20-year SGS at a cut-off 7.83% in Tuesday’s auction. These cut-offs were in line with or lower than the weighted average for the 10-year SGS, and softer than the cut-off of 11 to 18 years securities raised by Madhya Pradesh, Rajasthan, Uttar Pradesh, West Bengal in the auction,” the Icra report said.
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