Mumbai: State governments in poll-bound India are in an unusual rush to raise money via bonds, selling debt at twice the customary weekly frequency and likely causing a northward spike in yields through bunched and larger-than-expected supplies in an uncertain market otherwise seeking debt-cost cues from the Federal Reserve.
After bond market hours, the Reserve Bank of India (RBI) announced that Maharashtra and Uttar Pradesh have together offered to raise up to ₹24,000 crore through bonds Thursday. Each state would sell securities worth ₹12,000 crore.
Such a quantum of borrowing by individual states is much larger than the typical borrowing amount of around ₹2,000-3,000 crore for each state government. States normally sell securities only once a week – on Tuesdays.
Moreover, the announcement from the RBI came just hours after 17 local governments raised a massive ₹50,206 crore between them through the largest ever weekly bond auction carried out by states. Further, Maharashtra and Uttar Pradesh have already raised funds worth ₹8,000 crore and ₹6,000 crore, respectively, in Tuesday’s auction.
The unexpected bond supply that hit the market through Tuesday’s bond sale – 80% higher than earmarked in the calendar – has contributed to a rise of around 4 basis points in sovereign bond yields so far this week and traders expect more upward pressure on yields following the latest announcement by the RBI.
