 "bond market")
Seven states on Tuesday raised Rs. 10,400 crore through the auction for state government securities against Rs. 16,200 crore raised by nine states last week.
This week, the scheduled auction amount of state development loans (SDLs) was Rs. 10,400 crore against the notified amount of Rs. 11,400 crore, according to the borrowing calendar.
Long-term investors opt for state bonds rather than government bonds due to higher returns, dealers said.
“The demand for longer tenure is from specific investors. They don’t look at the price but the quantum, as they rarely come to the secondary market.
They normally bid at 2-3 basis points (bps) lower yield, as compared to market expectations ,” a dealer at a state-owned bank said. He added, “The shorter-tenure papers are bid by banks that look at the price.”
According to Reserve Bank of India (RBI) data, Tamil Nadu raised the highest amount — Rs. 3,000 crore through a 10-year bond. The cut-off on the 10-year paper was set at 7.42 per cent, against 7.44 per cent last week.
The yield spread between the 10-year SDLs and the benchmark 10-year government bond stood at 31 bps.
