MUMBAI: The Government of Kerala raised the largest amount of Rs3,500 crore during the sale of state development bonds (SDLs) issued on Tuesday by the state governments in Mumbai.
SDLs are issued through auctions similar to those conducted by the Central government for the issue of dated securities (G-Secs). Interest is serviced at half-yearly intervals and the principal is repaid on the maturity date.
The cut-off yield for Kerala’s SDLs with a tenure of 10 years was the highest at 8 per cent. While most state governments issued SDLs of 10-year maturity, Telengana came out with SDLs of 25-year tenure whereas Odisha issued the lowest tenured SDLs with three-year maturity.
The total funds raised through yesterday’s auction was Rs18,778.1 crore against a notified amount of Rs19,700 crore – Andhra Pradesh and Haryana accepted partial amounts only.
The inter-state variation in pricing was a maximum of only 23 basis points, the highest yield being 8 per cent and lowest being 7.77 per cent, barring that of Odisha which issued 25-year SDLs and Telengana’s three-year bonds.
A recent RBI study on SDL pricing had noted that in the near-absence of inter-state variations in the market pricing of SDLs at primary auctions, there is little market incentive for states to improve their fiscal position and lower their debt.