In the first weekly auction of Q2 FY2026, 10 state governments together raised Rs. 181 billion through state government securities (SGS) on July 1, 2025. This was in line with the amount indicated for this week in the Q2 FY2026 auction calendar. The weighted average cut-off of the SGS rose to a 15-week high of 7.05% on July 1, 2025 from 6.95% last week, with the increase in the weighted average tenor to 20 years from 16 years. Additionally, the spread between the cut-off yield of the 10-year SGS and the 10-year G-sec (6.33 GS 2035) widened to a 73-week high 52 bps on July 1, 2025 from 48 bps last week.

EXHIBIT: SGS issuances in FY2026 so far

EXHIBIT: Spread between weighted average cut-off of 10-year state and GoI G-sec yield

• Ten state governments borrowed Rs. 181 billion through SGS on July 1, 2025, in line with the amount indicated for this week in the Q2 FY2026 auction calendar.
• The RBI had pegged the gross issuance of SGS at Rs. 2.9 trillion for Q2 FY2026, implying a YoY expansion of 19.5%. Gujarat, Odisha and Uttar Pradesh account for nearly 80% of the incremental indicated amount of Rs. 469 billion for Q2 FY2026 relative to the year-ago level. In ICRA’s view, the actual SGS issuance in Q2 FY2026 could be impacted by a few factors, including the release of more than one instalment of monthly tax devolution to the states by the GoI in the quarter and the pace of disbursement of the interest-free capex loan to the states. Additionally, the magnitude and distribution of monsoon rainfall in the coming months could prompt some states to revise their spending plans, which may affect the actual SGS issuance relative to the planned amount.