Investors Shun Indian State Bonds as Lockdown Slashes Revenue
- Spreads over sovereign paper widened at first auction
- Fiscal deficit of almost all states likely to balloon
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India’s states are being forced to borrow more to pay for spending to combat the coronavirus crisis, while at the same time facing rising debt costs that’s putting their finances under even more strain.
The Reserve Bank of India has cut interest rates and injected more than $50 billion in liquidity since last month to help drive down borrowing costs in the economy. Yet, in an auction earlier this month investors charged a significantly higher premium to buy states’ bonds, highlighting their uneasiness over the deteriorating finances of regional governments.