Indian states are expected to borrow a record â¹5 trillion ($55.45 billion) during the January–March quarter, according to the Reserve Bank of India (RBI).
Bond market participants had anticipated a heavy borrowing schedule for the final quarter of the financial year, especially after states raised â¹7.13 trillion through bond sales in the first three quarters.
If states proceed with the planned borrowing, it will mark their highest-ever quarterly borrowing and push total borrowing for the year to a record high.
The increased issuance comes at a time when demand for bonds has weakened across segments of the market. As a result, the fresh supply of bonds is expected to put upward pressure on yields.
“Irrespective of whether the actual borrowing ends up being slightly lower, we are likely to see a rise in long-term yields for both central government and state government debt,” said a trader at a state-run bank.