IT'S hard to separate winners from losers in India's burgeoning market for state-government bonds. A recent debt auction saw West Bengal - a state struggling to meet its debt obligations - paying a coupon of 7.64 per cent to borrow for 10 years, the same as Haryana - a northern state that generates most revenue on its own, with limited reliance on federal grants.
The lack of price differentiation and liquidity is reason why global funds such as Pine-Bridge Investments Europe have largely stayed away from state bonds despite being granted access to them in 2015. Even so, raising funds isn't a tall order for states, as the implicit sovereign guarantee of their debt - besides yields that are typically...
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