Indian states refused a sizeable share of their own borrowing programme on Tuesday. The Reserve Bank of India’s full auction result shows 23,300 crore rupees of state government securities were notified across 22 tranches, competitive bids of 79,748 crore were received, and only 18,963 crore was allotted in total. The gap is not weak demand. It is issuers declining the price.
Four borrowers rejected paper outright. Gujarat accepted nothing on either of its tranches, the reissues of its 7.96 percent 2035 security (1,000 crore notified) and its 8.06 percent 2038 security (1,000 crore). Jharkhand accepted nothing on its 200 crore 2033 reissue, Kerala accepted nothing on its 1,500 crore new 14-year security despite 6,435 crore of competitive bids, and Sikkim accepted nothing on its 200 crore 2030 reissue. Assam took a partial 607 crore of its 1,000 crore nine-year sale and Nagaland a partial 257 crore of 300 crore.
Where states did pay, they paid above 8 percent almost everywhere. Accepted cut-off yields ran from 8.15 percent on Assam’s nine-year paper and 8.18 percent on Bihar’s nine-year and Nagaland’s nine-year, through 8.25 to 8.28 percent on the long Tamil Nadu, Uttar Pradesh and Bihar reissues out to 2056. The cheapest money of the day was Uttar Pradesh’s 2032 reissue at a 7.96 percent cut-off. Tamil Nadu, the largest borrower in the sale, took its full 11,000 crore across five tranches at weighted average yields between 8.24 and 8.27 percent.
The pattern matters beyond one auction. State development loans are the marginal funding instrument for India’s state governments, and a coordinated willingness to leave 4,337 crore unraised rather than print above roughly 8.28 percent tells the market where the borrowers’ reservation price now sits. The centre faces its own test on Friday, when the Reserve Bank auctions 33,000 crore of Government of India dated securities, including 3,000 crore of sovereign green bonds, in a separate notice covered in this edition’s roundup.