Hardening of yields: Increased reliance of Centre and States on market borrowings led to an oversupply of Government paper in the G-Sec market and contributed to hardening of sovereign yields. This results in a spiral, whereby increased market borrowings result in increasing redemption pressures which induces further borrowing to service outstanding debt and accumulated interest burden.
Weighted average yield increased from 7.48 per cent in 2016-17 to 7.60 per cent in 2017-18. Average spreads of SDL yields over Central Government securities of corresponding maturity have increased from 38 bps in 2014-15 to 59 bps in 20174  18 signifying increase in the cost of borrowing for the States.