ICRA weekly SDL tracker, Oct 6, 2020
INDIA: 18 state governments/Union territories raised Rs. 209 billion through state development loans (SDLs) in the auction held on November 3, 2020, a considerable 32.0% higher than initially indicated amount for this auction. Moreover, the SDLissuance today was a substantial 162.3% higher than the year-ago level. Till November 3, 2020, a total of Rs. 951 billion has been raised in the weekly SDL auctions held in Q3 FY2021, which is 47.0% of Rs. 2,022 billion that was indicated to be raised in Q3 FY2021.
Ten states issued Rs. 86 billion SDLs or 41.3% of the total issuance in the 10-year tenor, at a weighted average cut-off of 6.49%, 7 bps higher than the previous weekly auction. Rs. 96 billion or 46.0% of the total issuance was in the 12-30-year tenor. The 15, 20, and 30-year SDLs were issued at cut-off ranging from 6.78% to 6.84% on November 3, 2020, 2-8 bps higher than the previous week. Jammu and Kashmir (J&K) raised a 15-year SDL at a cut-off of 6.80%, while Telangana raised a 30-year SDL at the same cut-off of 6.80%, which may indicate differences in the market participants’ perception of the different states’ individual fiscal positions.
Despite the RBI’s announcement of the second Open Market Operation (OMO) in SDLs (purchase) of 15 states for Rs. 100 billion to be conducted on November 5, 2020, SDL cut-offs hardened in the week ending November 3, 2020, reversing some of the gains that had been made in the previous weekly auction
The weighted average 10-year SDL cut-off increased by 7 bps on November 3, 2020, from the previous week and the 10-year G-sec yield rose by 5 bps in the same period. Accordingly, the spread between the two increased by a mild 2 bps to 59 bps on November 3, 2020, from 57 bps on October 27, 2020.
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