Rising state government borrowing has depressed sentiment in the market with investors staying away from investing in central government securities for fear of rising valuation-linked losses. The supply of state paper, considered high-quality because of government backing, is raising yields across bonds. It has pushed up sovereign bond yields and, as a result, threatens corporate bond yields. Incessant supply means the private sector is elbowed out from the market by states. At a time when banks are not lending freely to companies, such crowding out does not augur well for them.