The cost of state debt is increasing and is almost 7.5%

States continue to charge investors greater interest rates for their debt; in the most recent auctions on Tuesday, nine states collected Rs 16,200 crore at a weighted average cost of 7.46 percent.

Despite a stable weighted average tenor of 16 years and the amount raised being in line with the amount indicated for this week in the auction calendar, the weighted average cut-off/yield on state government securities (SGS) increased by 5 basis points to 7.46 percent in the auction held Tuesday from 7.41 percent in the previous weekly auction, according to a note by Aditi Nayar, the chief economist at Icra Ratings.

As a result, the difference between the yields on the 10-year government of India security and the 10-year SGS spread somewhat narrowed to 32 bps from 34 bps last week.