Latest news with #StateDevelopmentLoans
Time of India
21 hours ago
- Business
- Time of India
State development loans face weak demand for seventh straight auction: ICICI Bank
State Development Loans (SDLs) continued to see subdued investor appetite for the seventh consecutive week, while central government securities (G-secs) witnessed better demand, especially for the newly introduced 30-year tenor, according to a report by ICICI Bank . In the latest SDL auction held last week, six states, Bihar, Goa, Haryana, Jammu and Kashmir, Maharashtra, and Telangana, raised Rs 85 billion, in line with the notified amount. It stated "State Development Loans: Weak demand for the seventh consecutive auction". by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Play War Thunder now for free War Thunder Play Now Undo However, the demand remained muted. The bid-to-cover ratio, which measures investor interest, edged slightly lower to 2.71 compared with 2.75 in the previous auction. Overall, the report stated that the cut-off yield for the entire auction rose sharply by 18 basis points to 7.26 per cent. This reflects sustained investor caution, as SDL auctions have now shown tepid demand for seven consecutive weeks. Live Events So far in the financial year, states have raised Rs 3,328 billion through SDLs, marking a 31% increase on a year-on-year basis. For this week, nine states are scheduled to raise Rs 176 billion, which is slightly lower than the auction calendar amount of Rs 185 billion. Meanwhile, the SDL spread over G-secs edged up by about one basis point to 45 basis points, highlighting the weak demand scenario. In contrast, the central government's borrowing programme witnessed healthier demand in the latest G-sec auction conducted on Thursday. The Centre raised INR 250 billion, in line with the notified amount, with issuance spread across the 5-year and a newly launched 30-year tenor. The auction drew a bid-to-cover ratio of 2.91, which was higher than the long-term average of 2.8. Demand trends, however, were mixed across maturities. The cut-off price for the 5-year tenor was marginally lower than market expectations, pointing towards weak appetite. Most of the bids came from domestic banks and mutual funds. On the other hand, the 30-year tenor saw strong participation. The cut-off yield was below market estimates, indicating robust demand. Insurance firms and pension funds emerged as the key buyers for the longer tenor bonds. Looking ahead, the report outlined that the Centre is expected to raise Rs 360 billion in the upcoming G-sec auction this week.
Mint
7 days ago
- Business
- Mint
Investing in bonds — A low-key asset class with steady growth potential
Investment advisor Martin Whitman had once written, 'With stocks, you have to worry about the market. With debt, I just have to understand the contract. If my analysis is right, I'll make money.' Investors may consider this lesser-known and mysterious asset class called bonds, vis-à-vis its more famous asset cousins like equities, MFs, gold, insurance, FDs, etc. 'In simple terms, a bond is a loan that you, as an investor, give to an issuer in exchange for regular interest payments and the return of your money at maturity (of the bond),' says Vishal Goenka, Co-Founder, In India, bonds are issued by the Government of India (through G-Secs and Treasury Bills), state governments (State Development Loans), public sector undertakings, private corporates, banks, and financial institutions. 'Bonds are similar to Fixed Deposits, in that they give regular fixed interest and principal payment. However, the difference, though, is that unlike FDs, bonds are tradable instruments,' points out Suresh Darak, Founder, Bondbazaar. So, once you have purchased a bond, you do not need to hold it till maturity. The investor can sell the bond on secondary markets just like stocks, after which the buyer receives the interest and principal on the remaining tenure of the bond. Bonds are suitable for most investor categories since they are versatile and provide solutions for every type of investing requirement. 'Investors looking for regular 10-12% fixed returns can explore Corporate bonds,' says Darak. Individuals wanting to save tax can explore Tax-Free bonds issued by government-backed entities, where the interest income is tax-free. Investors interested in buying gold can look at Sovereign Gold Bonds as a great way to benefit from appreciating gold prices as well as earn interest. Salaried professionals nearing retirement can consider deep discount bonds where the interest and principal payment happen after their retirement, possibly reducing the tax slab on which the income is applied. Thus, there are various use categories of bonds that investors can explore for both interest income as well as other purposes. For those working towards specific goals like children's education or a home purchase, Bonds allow you to match maturity timelines to your cash flow needs. 'Depending on the bond type—government, PSU, or corporate—they can cater to investors across the risk spectrum,' says Goenka. Till recently, bonds were largely an institutional product. 'But SEBI's framework for Online Bond Platform Providers (OBPPs) has opened the door for retail participation,' says Goenka. Today, you can buy listed bonds online, in small denominations starting from ₹ 10,000, through OBPPs. The process is as seamless as buying a mutual fund or stocks—search, select, complete KYC, and pay digitally. The debt securities are directly credited to your demat account. The interest and principal payments are made directly to the customer's bank account. There are SEBI-regulated OBPPs, as well as RBI Retail Direct, NSE, and BSE debt segments that allow investors to buy and sell bonds directly. On the Online Bond Platform Providers platforms, you can browse various bond offerings, filter by yield, rating, maturity, or issuer, complete your KYC online, and invest instantly. Once purchased, the bonds are credited to your demat account, and interest is credited directly to your bank. To buy bonds, investors can use any OBPP such as Bondbazaar, Indiabonds, Wint Wealth etc. 'They should ensure that the OBPP is SEBI-registered,' says Darak. The process of buying and selling bonds is almost identical to equities. Investors need to first create an account with an OBPP by completing their KYC, linking their bank account and demat account. Then they need to select the bond, fund their account and execute the transaction. Bonds will get credited in their demat account in T+2 days, with interest and principal payments credited to their bank accounts. To be sure, before investing in bonds, one must exercise due diligence, just like in any asset class. The investor must start with understanding the issuer's creditworthiness. In India, Bonds are rated by SEBI-regulated credit rating agencies like CRISIL, ICRA, CARE, and India Ratings, on a scale from AAA (highest safety) to D (default). 'While ratings are important, investors should also look at financial statements, past repayment history, and industry outlook. For higher yields, risks are usually higher—so assessing whether the yield compensates for the risk is critical,' says Goenka. The investor needs to look at who is issuing the bond — Is it a government body, a reputed company, or a lesser-known entity? 'Please note that selling bonds is not always as easy. This is where I believe investors need to be more cautious,' says Pallav Bagaria, Director at Sapient Finserv. While government securities tend to have better liquidity, many corporate bonds are thinly traded on the secondary market. Thus, if the investor needs to exit early, they may either struggle to find a buyer or may need to sell their bond at a discount. 'Liquidity matters, especially in the case of corporate bonds,' says Bagaria. Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.
Mint
06-07-2025
- Business
- Mint
Trading strategy to future outlook: LGT Wealth's Chirag Doshi points out four key things for Indian bond investors
India's fixed-income market is entering a defining phase. With inflation comfortably within the RBI's target band and growth on track, the current setup presents a compelling opportunity for investors to lock in attractive real yields with a prudent mix of quality and risk. Macro indicators continue to paint a favourable backdrop. Headline inflation has cooled to ~3%, GDP growth is tracking around 6.5%, and the Reserve Bank of India has front-loaded policy easing, cutting the repo rate by 100 bps so far in 2025 to 5.50%. A sharp reduction in the cash reserve ratio (CRR) has further eased systemic liquidity. While the RBI's stance has turned neutral, the overall tone remains accommodative. The government bond yield curve has flattened at the long end but remains steep in the 3- to 7-year segment. As of early July, the 5-year G-Sec trades near 6.00%, while the 10-year benchmark hovers around 6.30%. State Development Loans (SDLs), offering a 25–30 bps premium, remain attractive for incremental yield without compromising credit quality. We continue to find value in the 5–7-year part of the curve, where investors can capture both decent carry and roll-down potential. Long-duration positions are best approached selectively, especially considering global cues and potential domestic supply pressures. In the corporate bond market, shorter maturities (up to 5 years) dominate new issuance as issuers and investors both gravitate toward lower duration amidst falling rates. AAA-rated NBFCs and PSUs are raising capital at 6.60–6.80% for 5-year tenors—offering spreads of around 80–100 bps over corresponding G-Secs. For investors comfortable with slightly higher risk, selectively allocating to well-researched high-yielding credits in the A to A- category can meaningfully enhance portfolio carry. The key here is to remain cautious, focus on issuers with strong cash flows, seasoned promoters, and transparent governance, and avoid overexposure to any single name or sector. In this phase of the cycle, we recommend a laddered portfolio approach that combines duration and credit quality thoughtfully. The objective should be to build a robust carry while maintaining resilience against unexpected macro shifts. Liquidity sleeve (0–1 year): Deploy into liquid and ultra-short funds or short G-Secs for parking and capital preservation. Core carry (3–7 years): Focus on 5–7-year G-Secs and AAA-rated corporates to optimize yield and manage duration risk. Yield enhancement (2–4 years): Add select high-yielding A/A- rated bonds in moderation for portfolio lift, with strict attention to credit selection and size limits. The RBI's August policy review, which could provide clarity on the pace and extent of further easing. Inflation trajectory, particularly in food prices post-monsoon. Global rate trends and commodity prices, especially crude oil. Government borrowing calendar and potential changes to the fiscal glide path. Any of these factors could influence bond yields, particularly at the long end of the curve. With policy easing largely behind us and inflation under control, fixed income investors are well-placed to lock in real returns that look increasingly attractive on a risk-adjusted basis. The opportunity is not about chasing yield, but about building carry, layering quality, and being intentional with credit. At this juncture, prudently structured portfolios—anchored in core quality, with calibrated exposure to high-yielding credits—can deliver consistent performance through the cycle. The bond market, in short, is offering a window worth stepping into—cautiously, but confidently. The author, Chirag Doshi, is the CIO at LGT Wealth India. Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.
The Hindu
03-07-2025
- Business
- The Hindu
Telangana treading cautiously on market borrowings; it raised ₹17,400 crore in first quarter
Telangana Government appears to be treading cautiously in its market borrowings. It has proposed to raise ₹11,000 crore market borrowings during the July-September quarter of the current financial year [2025-26]. This is much lower compared to ₹17,400 crore raised during the April-June [first] quarter primarily to be used to credit assured amounts into the accounts of farmers under Rythu Bharosa — the farmers' investment support scheme. What are market borrowings? Market borrowings by State Governments refer to the funds that State governments raise by selling securities, primarily State Development Loans (SDLs), to investors in the market. Securities are assurances given by State government. The State government proposes to raise ₹4,500 crore in four tranches in July, participating in all but one auction of securities to be conducted by the Reserve Bank of India (RBI). It has raised ₹1,500 crore during the auction conducted on July 1 and plans to raise ₹3,000 crore in three instalments during the auctions to be held on July 15, 22 and 29. Similarly, the government indicated that it would raise ₹3,500 crore in three auctions during August and balance ₹3,000 crore in three more auctions during September taking the total borrowings to ₹11,000 crore for the quarter, according to the provisional figures in the indicative calendar of borrowings released by the RBI for the second quarter. Why are market borrowings raised? This is a key method for States to finance their fiscal deficits and fund various developmental activities. State Development Loans are now categorised as State Government Securities. A steep reduction in the borrowing limit by the Union Finance Ministry is said to be another reason for the State government to tread cautiously. The government had proposed to raise over ₹69,539 crore through borrowings, including open market borrowings of ₹64,539 crore during the current fiscal in the budget estimates. But the quantum had, however, been reduced steeply to ₹54,009 crore as could be seen from the provisional figures in the key indicators released by the Comptroller and Auditor General of India in the first two months forcing the Government to restructure its open market loans to meet the requirements. What are consolidated sinking and guarantee redemption fund? State governments have to deposit a certain amount with Reserve Bank of India under the consolidated sinking fund and guarantee redemption fund mandatorily. If a State government defaults on the loan payments, money is deducted from these funds. Expenditure on interest payment in two months While the cut in borrowing limit had come as a setback, the State Government is facing a tough task in the form of interest payments. The government had incurred ₹4,166 crore towards interest payment by May end, spending 21.51% of the ₹19,639 crore projected for the year in just two months.
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Business Standard
17-06-2025
- Business
- Business Standard
SDL-based STRIPS: Use for duration matching, not for tactical gains
Invest for more than 12 months to enjoy favourable tax treatment Listen to This Article Starting June 12, the Reserve Bank of India (RBI) has permitted the use of the separate trading of registered interest and principal of securities (STRIPS) mechanism for State Development Loans (SDLs). It was earlier allowed for central government securities (G-Secs). 'This will enhance price discovery, deepen liquidity, and pave the way for a transparent zero-coupon yield curve in state debt,' says Vishal Goenka, cofounder, Understanding STRIPS STRIPS involve breaking a standard bond — comprising regular interest (coupon) payments and a final principal repayment — into individual zero-coupon instruments. 'These zero-coupon government securities do not pay periodic interest, but are sold at
