MUMBAI, May 9: The Rs 3,000-crore, five-year government bond auction devolved 32.9 per cent on the Reserve Bank of India (RBI) and the primary market dealers. The coupon was fixed at 12.69 per cent.

The devolvement was in tune with market expectations. Most banks had bid between 12.55 per cent and 12.75 per cent, fund managers said. However, the weighted average coupon rate is at 12.61 per cent, which indicates that most players bid at around 12.60 per cent.

The rejection of Rs 986.98 crore has come as boon to the money market as these funds are expected to come into the system and dampen the call rates, fund managers said.

Besides, another Rs 2,000 crore will be available to the banking system because the central bank rejected them at the four-day repos auction held on Friday. Reserve Bank received three bids for the amount.

Most bankers now expect call rates to dip below five per cent on Saturday, because the rejections have increased the lendable resources in the system.The central bank also rejected Rs 57 crore received from competitive bidders at the 91-day treasury bills auction.

The amount accepted from competitive bidders was a mere Rs 5 crore. Another Rs 100 crore was accepted from a lone non-competitive bidder, and the rest (Rs 45 crore) devolved on the RBI and primary market dealers.

The Rs 3,000-crore bond issue received bids worth Rs 3,766.63 crore. The total funds expected to flow into the system because of the rejections is at least Rs 3,810.61 crore.

``This in effect means the total lendable funds on Saturday will be over Rs 4,000 crore if one considers the lendable resources with banks and financial institutions on Saturday,'' a chief dealer at a state-owned bank said. ``That means the domestic interest rates will be once again as low as 2-3 per cent,'' he added.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.