States raise ₹27,083.882 crore against a target of ₹29,050 crore in RBI auction

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Highlights

State governments raised ₹27,083.882 crore against a target of ₹29,050 crore in the RBI auction.
In the auction, Tamil Nadu accepted ₹9,500 crore, Haryana ₹4,000 crore and Uttar Pradesh ₹3,500 crore.
Cut-off yields ranged from 7.61 percent to 8.1476 percent, with partial or no acceptance for several issues pointing to selective market demand.

This article was translated from the original. Read the original version by our correspondent here.

State Securities Auction Results

According to a Reserve Bank of India press release, the yield- and price-based auction of state government securities targeted ₹29,050 crore, against which ₹27,083.882 crore was accepted. Assam, Bihar, Gujarat, Haryana, Jammu and Kashmir, Kerala, Mizoram, Nagaland, Odisha, Tamil Nadu and Uttar Pradesh participated in the auction.

Assam accepted ₹1,000 crore, Gujarat ₹2,500 crore, Haryana ₹4,000 crore, Jammu and Kashmir ₹1,000 crore, Kerala ₹1,000 crore, Mizoram ₹100 crore, Nagaland ₹450 crore, Odisha ₹500 crore, Tamil Nadu ₹9,500 crore and Uttar Pradesh ₹3,500 crore. Bihar accepted only ₹1,533.882 crore against an offer of ₹2,000 crore for its 18-year security, while the full ₹2,000 crore was accepted for its other security maturing in 2051.

Chhattisgarh received no accepted bids for its two re-issue securities maturing in 2036 and 2042, which had a combined size of ₹1,500 crore. Available data shows cut-off yields for several issues ranging from 7.61 percent to 8.1476 percent, while some securities were allotted through price-based bidding and others through direct yield-based bidding.

State Borrowing and Market Signals

The auction results show that states continue to have borrowing needs, but the market is not accepting all offerings in full. Issues with partial or no acceptance suggest that investor demand may be more selective for certain maturities and coupon structures.

Tamil Nadu was the largest borrower in this round, raising ₹9,500 crore through four securities. Haryana and Uttar Pradesh were also among the larger borrowers, while smaller states such as Mizoram and Nagaland completed relatively small issues, reflecting a mix of large and small borrowers in the State Development Loan market.

Our previous report discussed the RBI's upward revisions to its FY27 growth and inflation forecasts, a 25-basis-point repo rate hike, and signs of “calibrated tightening.” It noted that a tighter policy stance amid high inflation, a weak monsoon and pressure from commodity and fuel prices could have important implications for government bond yields and funding costs.

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