The decision by State Bank of India to accept slightly higher-than-expected yields at its Tier-II bond sale on Wednesday is likely to push up the cost of borrowing for other lenders, Reuters reported quoting bankers.

SBI raised Rs 10,000 crore through 15-year Tier-II bonds with a 10-year call option at an annual coupon of 7.81%, compared with market expectations of between 7.72% and 7.78%.

“The coupon was slightly higher than expectations. But looking at the current scenario, we do not expect yields to see any material downside in the near term,” Ajay Manglunia, managing director and head of the investment grade group at JM Financial, told Reuters.

Canara Bank, Bank of India and IDFC First Bank are among the lenders looking to issue Tier-II bonds in the coming weeks on expectations that interest rates will remain elevated in the near term, Reuters reported speaking to merchant bankers.

SBI got bids worth Rs 15,907 crore, against its base size of Rs 4,000 crore. It had received bids worth Rs 8,305 crore for a cut-off of up to 7.74%.

“Since we have the Federal Reserve policy later today, the bank must not be wanting to come again to complete its planned sale and hence, took the complete amount, even if it had to pay slightly higher,” one of the bankers told Reuters.

The rise in corporate debt yields is due to the relatively narrower spread with government bond yields and an oversupply of overall debt.

Indian states have raised a larger-than-scheduled quantum of funds via debt and the market expects further supply from the central bank’s announced central government debt sale, Reuters reported.

Indian states sold 10-year bonds in the 7.71%-7.77% band, with the annualised yield still working out to be more than for SBI’s bond.

“There is demand for corporate bonds,” Aneesh Srivastava, executive director and chief investment officer at Star Health Insurance, told Reuters.

“But yields are still not attractive enough to o go for these papers in a big way.”