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ICRA Ratings in its latest report has said that amid continuing lower supplies, the borrowing cost for states fell to a 32-week low of 7.40 per cent on March 5, 2024, down by 4 bps from the previous week's auctions. Throughout January, the interest rates were hovering at a two-year high of close to 7.9 per cent. Then rates started falling after states began to auction lower than earlier disclosed debt after the government cleared the Central share of tax devolution in early February.

According to the report, eleven states raised Rs 28,000 crore from state government securities (SGS), which is 27 per cent lower than the Rs 38,200 crore indicated for this week in the auction calendar. As a result, the weighted average cut-off eased by 4 bps to 7.40 per cent, the lowest in the past 32 weeks.

The report further said the fall in the pricing was despite a mild increase in the weighted average tenor to 15 years from 14 during the week. The spread between the cut-off of the 10-year state bonds and the benchmark 10-year G-sec (7.18 GS 2033) yield narrowed to 35 bps from 37 bps last week. Year-to-date, states have borrowed Rs 8.423 lakh crore, 29.8 per cent more than what they had borrowed in the same period last fiscal at Rs 6.488 lakh crore.