Eight state governments raised Rs. 116 billion through state government securities (SGS) on May 26, 2026, less than half of the indicated amount in the Q1 FY2027 auction calendar. The actual issuance by states that had adopted the Benchmark Issuance Strategy (BIS) except for Bihar was in line with their indicated amounts for this auction. Bihar partially accepted bids (Rs. 9 billion vs. Rs. 12 billion) for its 9-year SGS. In contrast, seven non-BIS states – Goa,Karnataka,Odisha,Punjab,Sikkim,Tamil Nadu and West Bengal– had indicated a borrowing of Rs. 108 billion on May 26, 2026, but did not participate in the auction. Additionally, Gujarat and Uttarakhand under-borrowed by Rs. 15 billion on account of non-acceptance/partial acceptance. Assam raised an additional Rs. 3 billion through SGS.

In the auction held on May 26, 2026, ~66% of the total issuance was in longer tenors, ~21% in the shorter tenors and the balance 13% in the 10-year bucket. The weighted average tenor of all SGS declined mildly to 15 years in this auction from 16 years last week. The weighted average SGS cut-off eased by 5 bps to 7.81% in the auction held on May 26, 2026, from 7.86% last week. The new benchmark 10-year G-sec (06.94 GS 2036) yield declined to 6.98% on May 26, 2026 from 7.05% last Tuesday. During the same period, the weighted average cut-off of 10-year SGS decreased to 7.78% from 7.82%. Accordingly, the spread between them rose to 81 bps on May 26, 2026 from 77 bps last week.

EXHIBIT: Indicated and actual SGS issuances in Q1 FY2027 so far

Source: RBI, ICRA Research