India’s state borrowing programme cleared almost in full on Tuesday, but not cheaply. Thirteen states offered a combined 31,200 crore rupees of state government securities and accepted 30,005 crore, according to the Reserve Bank of India’s results release, with cut-off yields clustered around 8% and the longest paper, Tamil Nadu’s 30-year tranche, clearing at 8.18% alongside a 25-year at 8.21%.
Two details in the table show where demand thinned. Assam accepted only 805 crore of its 1,000 crore 11-year offer at 8.10%, and Gujarat accepted nothing at all on its 12-year tranche while filling its 9-year at 7.96%. The rest of the book filled, including 7,000 crore across Tamil Nadu’s three long tranches and 5,400 crore from West Bengal, but the pattern is consistent: investors will take state duration, at a price, and they are discriminating by tenor.
The centre adds to the calendar on Friday. The government will re-issue 34,000 crore rupees of the 6.94% security maturing in 2036 on October 16, with an option to retain a further 2,000 crore of additional subscription, settling October 19. The security is eligible for when-issued trading from Tuesday, so the market gets three days to price the week’s largest single supply event before the auction itself.
Set against the same day’s official operations, the curve message is stark. The RBI’s open-market sale of central government securities cleared at cut-offs between 7.14% and 7.39%, while states are paying roughly 8% and above for comparable and longer maturities. That gap, close to a full percentage point at the long end, is the fiscal cost of heavy combined borrowing landing in a market where the central bank has just raised the repo rate to 5.50% and is actively draining liquidity.