Ahead of the monetary policy announcement on Thursday, wherein the MPC is likely to begin liquidity tightening with a marginal Reverse Repo Rate hike, states on Tuesday had to pay a higher price to bond investors as the weighted average cut-off rate jumped by a hefty 41 basis points (bps) to 7.24 per cent. 

In the previous auction of State Development Loans (SDLs) last Tuesday, the cut-off was 6.83 per cent. 

However, the weighted average cut-off for the 10-year State debt issuance hit a record 7.29 per cent on Tuesday. This is 8 bps higher than 7.21 per cent seen last week, and the spread between the 10-year G-Sec yield and SDL widened to 48 bps from 38 bps. 

On Tuesday, the 10-year G-Sec yield eased to 6.81 per cent compared to 6.83 per cent last week. 

At the latest auctions, nine States raised Rs 14,200 crore, which is 48 per cent lower than the indicated level for the week at Rs 27,500 crore. Eleven of the 19 Sates, which had initially indicated a borrowing of Rs 12,300 crore, did not participate in today’s auction. 

Additionally, Maharashtra lowered its drawdown by Rs 1,000 crore and Mizoram by Rs 100 crore. Manipur borrowed Rs 60 crore even though it did not initially indicate its participation.