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States interest cost inches up as borrowing grows 8%

January 24, 2023 09:29 pm | Updated 09:29 pm IST - Mumbai

After remaining stable for many weeks, the cost of borrowing for states inched up by 5 basis points to 7.64% at Tuesday’s auction when 15 of them raised ₹25,700 crore from the market.

The amount of debt raised today is a 13-week high and for the first time shows an annualised growth of 8% year-to-date – a first as throughout the year, the weekly borrowing has been below the year-earlier weeks, yet 15% lower than the indicated amount in the borrowing calendar, according to a note by ICRA Ratings.

The weighted average cut-off on state government loans rose 5 basis points to 7.64% over the previous week, and the weighted average tenor rose to 13 years from 11 during the week.

The spread between the 10-year state bonds and G-sec (government securities) yield stood at 30 basis points today, amidst an inverted yield curve, according to Aidti Nayar, chief economist and head research and outreach at ICRA.

States have cumulatively raised ₹5.12 lakh crore from the market, 6.7% lower than what they did last year when it was ₹5.46 lakh crore.

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